[Federal Register Volume 90, Number 82 (Wednesday, April 30, 2025)]
[Proposed Rules]
[Pages 18002-18491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-06271]
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Vol. 90
Wednesday,
No. 82
April 30, 2025
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 412, 413, et al.
Medicare Program; Hospital Inpatient Prospective Payment Systems for
Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Policy Changes and Fiscal Year 2026 Rates;
Requirements for Quality Programs; and Other Policy Changes; Proposed
Rule
Federal Register / Vol. 90 , No. 82 / Wednesday, April 30, 2025 /
Proposed Rules
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 412, 413, 495, and 512
[CMS-1833-P]
RIN 0938-AV45
Medicare Program; Hospital Inpatient Prospective Payment Systems
for Acute Care Hospitals and the Long-Term Care Hospital Prospective
Payment System and Policy Changes and Fiscal Year 2026 Rates;
Requirements for Quality Programs; and Other Policy Changes
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the Medicare hospital
inpatient prospective payment systems (IPPS) for operating and capital-
related costs of acute care hospitals; make changes relating to
Medicare graduate medical education (GME) for teaching hospitals;
update the payment policies and the annual payment rates for the
Medicare prospective payment system (PPS) for inpatient hospital
services provided by long-term care hospitals (LTCHs); update and make
changes to requirements for certain quality programs; and make other
policy-related changes.
DATES: To be assured consideration, comments must be received at one of
the addresses provided in the ADDRESSES section, no later than 5 p.m.
EDT on June 10, 2025.
ADDRESSES: In commenting, please refer to file code CMS-1833-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to https://www.regulations.gov.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1833-P, P.O. Box 8013,
Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1833-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Donald Thompson, and Michele Hudson, (410) 786-4487 or
[email protected], Operating Prospective Payment, MS-DRG Relative
Weights, Wage Index, Hospital Geographic Reclassifications, Graduate
Medical Education, Capital Prospective Payment, Excluded Hospitals,
Medicare Disproportionate Share Hospital (DSH) Payment Adjustment, Sole
Community Hospitals (SCHs), Medicare-Dependent Small Rural Hospital
(MDH) Program, Low-Volume Hospital Payment Adjustment, and Inpatient
Critical Access Hospital (CAH) Issues.
Emily Lipkin, Jim Mildenberger and Hyeyoung Kim, [email protected],
Long-Term Care Hospital Prospective Payment System and MS-LTC-DRG
Relative Weights Issues.
Lily Yuan, [email protected], New Technology Add-On Payments
Issues.
Mady Hue, [email protected], and Andrea Hazeley,
[email protected], MS-DRG Classifications Issues.
Radhika Puri, [email protected], Rural Community Hospital
Demonstration Program Issues.
Jeris Smith, [email protected], Frontier Community Health
Integration Project (FCHIP) Demonstration Issues.
Lang Le, [email protected], Hospital Readmissions Reduction
Program--Administration Issues.
Ngozi Uzokwe, [email protected], Hospital Readmissions
Reduction Program--Measures Issues.
Jennifer Tate, [email protected], Hospital-Acquired
Condition Reduction Program--Administration Issues.
Ngozi Uzokwe, [email protected], Hospital-Acquired Condition
Reduction Program--Measures Issues.
Julia Venanzi, [email protected], Hospital Inpatient
Quality Reporting Program and Hospital Value-Based Purchasing Program--
Administration Issues.
Melissa Hager, [email protected], and Ngozi Uzokwe,
[email protected]--Hospital Inpatient Quality Reporting Program
and Hospital Value-Based Purchasing Program--Measures Issues Except
Hospital Consumer Assessment of Healthcare Providers and Systems
Issues.
Elizabeth Goldstein, [email protected], Hospital
Inpatient Quality Reporting and Hospital Value-Based Purchasing--
Hospital Consumer Assessment of Healthcare Providers and Systems
Measures Issues.
Jennifer Tate, [email protected], PPS-Exempt Cancer
Hospital Quality Reporting--Administration Issues.
Kristina Rabarison, [email protected], PPS-Exempt
Cancer Hospital Quality Reporting Program-Measure Issues.
Ariel Cress, [email protected], Long-Term Care Hospital
Quality Reporting Program--Administration Issues.
Jessica Warren, [email protected], and Lisa Marie Gomez,
[email protected], Medicare Promoting Interoperability
Program.
Bridget Dickensheets, [email protected] and Mollie
Knight, [email protected], IPPS Market Basket Rebasing.
[email protected], Transforming Episode Accountability Model
(TEAM).
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to
view public comments. CMS will not post on Regulations.gov public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
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plain language summary of this proposed rule may be found at https://www.regulations.gov/.
Deregulation Request for Information (RFI): On January 31, 2025,
President Trump issued Executive Order (E.O.) 14192 ``Unleashing
Prosperity Through Deregulation,'' which states the Administration
policy to significantly reduce the private expenditures required to
comply with Federal regulations to secure America's economic prosperity
and national security and the highest possible quality of life for each
citizen. We would like public input on approaches and opportunities to
streamline regulations and reduce administrative burdens on providers,
suppliers, beneficiaries, and other interested parties participating in
the Medicare program. CMS has made available an RFI at https://www.cms.gov/medicare-regulatory-relief-rfi. Please submit all comments
in response to this RFI through the provided weblink.
Tables Available on the CMS Website
The IPPS tables for this fiscal year (FY) 2026 proposed rule are
available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link
on the left side of the screen titled ``FY 2026 IPPS Proposed rule Home
Page'' or ``Acute Inpatient--Files for Download.'' The LTCH PPS tables
for this FY 2026 proposed rule are available on the CMS website at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for Regulation
Number CMS-1833-P. For further details on the contents of the tables
referenced in this proposed rule, we refer readers to section VI. of
the Addendum to this FY 2026 IPPS/LTCH PPS proposed rule.
Readers who experience any problems accessing any of the tables
that are posted on the CMS websites, as previously identified, should
contact Michael Treitel, [email protected].
I. Executive Summary and Background
A. Executive Summary
1. Purpose and Legal Authority
This FY 2026 IPPS/LTCH PPS proposed rule would make payment and
policy changes under the Medicare inpatient prospective payment system
(IPPS) for operating and capital-related costs of acute care hospitals
as well as for certain hospitals and hospital units excluded from the
IPPS. In addition, it would make payment and policy changes for
inpatient hospital services provided by long-term care hospitals
(LTCHs) under the long-term care hospital prospective payment system
(LTCH PPS). This proposed rule also would make policy changes to
programs associated with Medicare IPPS hospitals, IPPS-excluded
hospitals, and LTCHs. We are also proposing changes relating to
Medicare graduate medical education (GME) for teaching hospitals.
We are proposing several changes across pay for performance
programs. In the Hospital Value-Based Purchasing (VBP) Program, we are
proposing modifications to the Hospital-Level Total Hip Arthroplasty/
Total Knee Arthroplasty (THA/TKA) Complications measure beginning with
the FY 2033 program year. We are also providing notice of the technical
update to the five National Healthcare Safety Network (NHSN) Healthcare
Associated Infection (HAI) measures beginning with the FY 2028 program
year, and the technical update to remove the COVID-19 exclusion from
the six measures in the Clinical Outcomes domain beginning with the FY
2027 program year. Lastly, we provide previously and newly established
performance standards for the FY 2028 through FY 2031 program years for
the Hospital VBP Program. In the Hospital Acquired-Conditions (HAC)
Reduction Program, we are also providing notice of the technical update
to the five Centers for Disease Control National Control (CDC) NHSN
healthcare-associated infection (HAI) measures. In the Hospital
Readmissions Reduction Program, we are proposing to add Medicare
Advantage (MA) beneficiaries to the six Hospital Readmissions Reduction
Program (HRRP) measures and make corresponding administrative updates.
In the PPS-Exempt Cancer Hospital Quality Reporting Program
(PCHQR), we are proposing to modify the public reporting requirements
and remove three existing measures.
In the Hospital Inpatient Quality Reporting (IQR) Program, we are
proposing to modify four existing quality measures and remove four
existing measures.
We also are proposing to update and codify the Extraordinary
Circumstances Exception (ECE) policy to clarify that CMS has the
discretion to grant an extension in response to an ECE request from a
hospital in the Hospital IQR, Hospital Readmissions Reduction, PCHQR,
HAC Reduction, and Hospital VBP Programs.
In the Medicare Promoting Interoperability Program, we are
proposing to define the electronic health record (EHR) reporting period
in CY 2026 and subsequent years as a minimum of any continuous 180-day
period within that calendar year for eligible hospitals and CAHs
participating in the Medicare Promoting Interoperability Program and to
make corresponding revisions at 42 CFR 495.4. We are proposing to
modify the Security Risk Analysis measure beginning with the EHR
reporting period in CY 2026. We are proposing to modify the Safety
Assurance Factors for EHR Resilience (SAFER) Guides measure beginning
with the EHR reporting period in CY 2026. We are proposing to add an
optional bonus measure under the Public Health and Clinical Data
Exchange objective for reporting data to a public health agency (PHA)
using the Trusted Exchange Framework and Common Agreement (TEFCA)
beginning with the EHR reporting period in CY 2026.
In the LTCH Quality Reporting Program (QRP), we are proposing to
remove one item from the LTCH Continuity Assessment Record and
Evaluation (CARE) Data Set (LCDS) with respect to patients who have
expired in the LTCH. We are also proposing to remove four Social
Determinant of Health (SDOH) standardized patient assessment data
elements from the LCDS. Next, we are proposing to amend the
reconsideration request process in the LTCH QRP. Finally, we include
Requests for Information (RFIs) on: (1) future measure concepts for the
LTCH QRP; (2) revisions to the data submission deadlines for assessment
data collected for the LTCH QRP; and (3) advancing digital quality
measurement (dQM) in the LTCH QRP.
The Transforming Episode Accountability Model (TEAM), a mandatory
alternative payment model that was finalized in the FY 2025 IPPS/LTCH
PPS final rule (89 FR 68986), aims to improve beneficiary care through
financial accountability for episodes categories that begin with one of
the following procedures: coronary artery bypass graft (CABG), lower
extremity joint replacement (LEJR), major bowel procedure, surgical
hip/femur fracture treatment (SHFFT), and spinal fusion. TEAM will test
whether financial accountability for these episode categories reduces
Medicare expenditures while preserving or enhancing the quality of care
for Medicare beneficiaries. In this proposed rule, we are proposing
updates to TEAM that would modify policies affecting participation of
new hospitals, quality measure and assessment, the construction of
target prices, the removal of certain health reporting elements, the
expansion of the Skilled
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Nursing Facility (SNF) 3-Day Rule, and the removal of the
Decarbonization and Resilience Initiative (DRI). Additionally, the
policies in this proposed rule reflect our commitment to ensuring
TEAM's incentives help to drive beneficiary quality of care
improvements and reductions in Medicare spending.
Under various statutory authorities, we either discuss continued
program implementation or propose to make changes to the Medicare IPPS,
the LTCH PPS, other related payment methodologies and programs for FY
2026 and subsequent fiscal years, and other policies and provisions
included in this proposed rule. These statutory authorities include,
but are not limited to, the following:
Section 1886(d) of the Social Security Act (the Act),
which sets forth a system of payment for the operating costs of acute
care hospital inpatient stays under Medicare Part A (Hospital
Insurance) based on prospectively set rates. Section 1886(g) of the Act
requires that, instead of paying for capital-related costs of inpatient
hospital services on a reasonable cost basis, the Secretary use a
prospective payment system (PPS).
Section 1886(d)(1)(B) of the Act, which specifies that
certain hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: rehabilitation hospitals and units; LTCHs;
psychiatric hospitals and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals; and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
Sections 123(a) and (c) of the Balanced Budget Refinement
Act of 1999 (BBRA) (Public Law (Pub. L.) 106-113) and section 307(b)(1)
of the Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L.
106-554) (as codified under section 1886(m)(1) of the Act), which
provide for the development and implementation of a prospective payment
system for payment for inpatient hospital services of LTCHs described
in section 1886(d)(1)(B)(iv) of the Act.
Section 1814(l)(4) of the Act requires, beginning with FY
2015, that CAHs that do not successfully demonstrate meaningful use of
certified electronic health record technology (CEHRT) for an EHR
reporting period for a cost reporting period shall be paid 100 percent
of reasonable costs rather than 101 percent of reasonable costs.
Section 1886(a)(4) of the Act, which specifies that costs
of approved educational activities are excluded from the operating
costs of inpatient hospital services. Hospitals with approved graduate
medical education (GME) programs are paid for the direct costs of GME
in accordance with section 1886(h) of the Act. Hospitals paid under the
IPPS with approved GME programs are paid for the indirect costs of
training residents in accordance with section 1886(d)(5)(B) of the Act.
Section 1886(d)(5)(F) of the Act provides for additional
Medicare IPPS payments to subsection (d) hospitals that serve a
significantly disproportionate number of low-income patients. These
payments are known as the Medicare disproportionate share hospital
(DSH) adjustment. Section 1886(d)(5)(F) of the Act specifies the
methods under which a hospital may qualify for the DSH payment
adjustment.
Section 1886(b)(3)(B)(viii) of the Act, which requires the
Secretary to reduce the applicable percentage increase that would
otherwise apply to the standardized amount applicable to a subsection
(d) hospital for discharges occurring in a fiscal year if the hospital
does not submit data on measures in a form and manner, and at a time,
specified by the Secretary.
Section 1886(b)(3)(B)(ix) of the Act, which requires
downward adjustments to the applicable percentage increase, beginning
with FY 2015 (and beginning with FY 2022 for subsection (d) Puerto Rico
hospitals), for eligible hospitals that do not successfully demonstrate
meaningful use of CEHRT for an EHR reporting period for a payment
adjustment year.
Section 1866(k) of the Act, which provides for the
establishment of a quality reporting program for hospitals described in
section 1886(d)(1)(B)(v) of the Act, referred to as ``PPS-exempt cancer
hospitals.''
Section 1886(n) of the Act, which establishes the
requirements for an eligible hospital to be treated as a meaningful EHR
user for an EHR reporting period for a payment year or, for purposes of
subsection (b)(3)(B)(ix) of the Act, for a fiscal year.
Section 1886(o) of the Act, which requires the Secretary
to establish a Hospital Value-Based Purchasing (VBP) Program, under
which value-based incentive payments are made in a fiscal year to
hospitals based on their performance on measures established for a
performance period for such fiscal year.
Section 1886(p) of the Act, which establishes a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to
applicable hospitals are adjusted to provide an incentive to reduce
hospital-acquired conditions.
Section 1886(q) of the Act, as amended by section 15002 of
the 21st Century Cures Act, which establishes the Hospital Readmissions
Reduction Program. Under the program, payments for discharges from an
applicable hospital as defined under section 1886(d) of the Act will be
reduced to account for certain excess readmissions. Section 15002 of
the 21st Century Cures Act directs the Secretary to compare hospitals
with respect to the number of their Medicare-Medicaid dual-eligible
beneficiaries in determining the extent of excess readmissions.
Section 1886(r) of the Act, as added by section 3133 of
the Affordable Care Act, which provides for a reduction to
disproportionate share hospital (DSH) payments under section
1886(d)(5)(F) of the Act and for an additional uncompensated care
payment to eligible hospitals. Specifically, section 1886(r) of the Act
requires that, for fiscal year 2014 and each subsequent fiscal year,
subsection (d) hospitals that would otherwise receive a DSH payment
made under section 1886(d)(5)(F) of the Act will receive two separate
payments: (1) 25 percent of the amount they previously would have
received under the statutory formula for Medicare DSH payments in
section 1886(d)(5)(F) of the Act if subsection (r) did not apply (``the
empirically justified amount''), and (2) an additional payment for the
DSH hospital's proportion of uncompensated care, determined as the
product of three factors. These three factors are: (1) 75 percent of
the payments that would otherwise be made under section 1886(d)(5)(F)
of the Act, in the absence of section 1886(r) of the Act; (2) 1 minus
the percent change in the percent of individuals who are uninsured; and
(3) the hospital's uncompensated care amount relative to the
uncompensated care amount of all DSH hospitals expressed as a
percentage.
Section 1886(m)(5) of the Act, which requires the
Secretary to reduce by 2 percentage points the annual update to the
standard Federal rate for discharges for a long-term care hospital
(LTCH) during the rate year for LTCHs that do not submit data on
quality measures in the form, manner, and at a time, specified by the
Secretary.
Section 1886(m)(6) of the Act, as added by section
1206(a)(1) of the Pathway for Sustainable Growth Rate (SGR) Reform Act
of 2013 (Pub. L. 113-67) and amended by section 51005(a) of the
Bipartisan Budget Act of 2018 (Pub.
[[Page 18005]]
L. 115-123), which provided for the establishment of site neutral
payment rate criteria under the LTCH PPS, with implementation beginning
in FY 2016. Section 51005(b) of the Bipartisan Budget Act of 2018
amended section 1886(m)(6)(B) by adding new clause (iv), which
specifies that the IPPS comparable amount defined in clause (ii)(I)
shall be reduced by 4.6 percent for FYs 2018 through 2026.
Section 1899B of the Act, which provides for the
establishment of standardized data reporting for certain post-acute
care providers, including LTCHs.
Section 1115A of the Act authorizes the testing of
innovative payment and service delivery models that preserve or enhance
the quality of care furnished to Medicare, Medicaid, and Children's
Health Insurance Program (CHIP) beneficiaries while reducing program
expenditures.
2. Summary of the Major Provisions
The following is a summary of the major provisions in this proposed
rule. In general, these major provisions are being proposed as part of
the annual update to the payment policies and payment rates, consistent
with the applicable statutory provisions. A general summary of the
changes in this proposed rule is presented in section I.D. of the
preamble of this proposed rule.
a. Proposed Transition for the Discontinuation of the Low Wage Index
Hospital Policy
To help mitigate growing wage index disparities between high wage
and low wage hospitals, in the FY 2020 IPPS/LTCH PPS rule (84 FR 42326
through 42332), we adopted a policy to increase the wage index values
for certain hospitals with low wage index values (the low wage index
hospital policy). This policy was adopted in a budget neutral manner
through an adjustment applied to the standardized amounts for all
hospitals. We indicated our intention that this policy would be
effective for at least 4 years, beginning in FY 2020, in order to allow
employee compensation increases implemented by these hospitals
sufficient time to be reflected in the wage index calculation. We also
stated we intended to revisit the issue of the duration of this policy
in future rulemaking as we gained experience under the policy. In the
FY 2025 IPPS/LTCH PPS final rule (89 FR 69301 through 69308), we
adopted an extension of the low wage index hospital policy and the
related budget neutrality adjustment effective for at least three more
years, beginning in FY 2025, in order for sufficient wage data from
after the end of the COVID-19 Public Health Emergency to become
available.
As discussed in section III.F.5. of the preamble of this proposed
rule, on July 23, 2024, the Court of Appeals for the D.C. Circuit held
that the Secretary lacked authority under section 1886(d)(3)(E) of the
Act or under the ``adjustments'' language of section 1886(d)(5)(I)(i)
of the Act to adopt the low wage index hospital policy for FY 2020, and
that the policy and related budget neutrality adjustment must be
vacated. Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6 (D.C.
Cir. 2024). After considering the D.C. Circuit's decision in Bridgeport
Hosp. v. Becerra, in the FY 2025 IFC (89 FR 80405 through 80421), we
recalculated the FY 2025 IPPS hospital wage index to remove the low
wage index hospital policy for FY 2025. We also removed the low wage
index budget neutrality factor from the FY 2025 standardized amounts.
In addition, we established an interim transition policy for hospitals
significantly impacted by the removal of the FY 2025 low wage index
hospital policy using our authority under section 1886(d)(5)(I) of the
Act.
For FY 2026 and subsequent fiscal years, after considering the D.C.
Circuit's decision in Bridgeport Hosp. v. Becerra, we are proposing to
discontinue the low wage index hospital policy and would no longer
apply a low wage index budget neutrality factor to the standardized
amounts. As discussed in section III.F.7. of the preamble of this
proposed rule, we are proposing to use our authority under section
1886(d)(5)(I)(i) of the Act to adopt a narrow transitional exception to
the calculation of FY 2026 IPPS payments for low wage index hospitals
significantly impacted by the discontinuation of the low wage index
hospital policy, that would be implemented in a budget neutral manner.
This proposed transitional exception policy would apply to hospitals
that benefitted from the FY 2024 low wage index hospital policy and
would compare the hospital's proposed FY 2026 wage index to the
hospital's FY 2024 wage index. If the hospital's proposed FY 2026 wage
index is decreasing by more than 9.75 percent from the hospital's FY
2024 wage index, then the proposed transitional payment exception for
FY 2026 for that hospital would be equal to the additional FY 2026
amount the hospital would be paid under the IPPS if its FY 2026 wage
index were equal to 90.25 percent of its FY 2024 wage index. We
proposed to make this policy budget neutral through an adjustment
applied to the standardized amounts for all hospitals.
b. Proposed Update to the IPPS Labor-Related Share
As discussed in section IV. of the preamble of this proposed rule,
we are proposing to rebase and revise the 2018-based IPPS market basket
to reflect a 2023 base year. In addition, using the cost category
weights from the proposed 2023-based IPPS market basket, we calculated
a labor-related share of 66.0 percent, which we are proposing to use
for discharges occurring on or after October 1, 2025. The proposed
labor-related share of 66.0 percent is 1.6 percentage points lower than
the current labor-related share of 67.6 percent. As discussed in
section IVB.3. of the preamble of this proposed rule, this downward
revision to the labor-related share is primarily the result of
incorporating the more recent 2023 Medicare cost report data for Wages
and Salaries, Employee Benefits, and Contract Labor costs. This is
partially offset by an increase in the Professional Fees: Labor-Related
cost weight.
c. Hospital Readmission Reduction Program
We are proposing to make changes to policies for the Hospital
Readmissions Reduction Program, which was established under section
1886(q) of the Act, as amended by section 15002 of the 21st Century
Cures Act. The Hospital Readmissions Reduction Program requires a
reduction to a hospital's base operating DRG payment to account for
excess readmissions of selected applicable conditions. In this FY 2026
IPPS/LTCH PPS proposed rule, we are proposing the following policies:
(1) Refine all six readmission measures to add Medicare Advantage
patient cohort data; (2) remove the COVID-19 diagnosed patients measure
denominator exclusion from the all six readmission measures, beginning
with the FY 2026 program year; (3) reduce the applicable period from 3-
years to 2-years and update codified regulation language; (4) modify
the diagnosis-related group (DRG) payment ratios in the payment
adjustment formula to include MA beneficiaries; and (5) update and
codify the ECE policy to clarify that CMS has the discretion to grant
an extension in response to an ECE request from a hospital.
d. Hospital Acquired Condition (HAC) Reduction Program
Section 1886(p) of the Act establishes the HAC Reduction Program
under which payments to applicable hospitals are adjusted to provide an
incentive to
[[Page 18006]]
reduce hospital-acquired conditions. In this FY 2026 IPPS/LTCH PPS
proposed rule, we are making a technical update to the NHSN Healthcare
Associated Infection (HAI) measures baseline. We are also proposing to
update and codify the ECE policy to clarify that CMS has the discretion
to grant an extension in response to an ECE request from a hospital.
e. Hospital Value-Based Purchasing (VBP) Program
Section 1886(o) of the Act requires the Secretary to establish a
Hospital VBP Program under which value-based incentive payments are
made in a fiscal year to hospitals based on their performance on
measures established for a performance period for such fiscal year. In
this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing
modifications to the THA/TKA Complications measure beginning with the
FY 2033 program year. We are also providing notice of the technical
update to remove the COVID-19 exclusion from the six measures in the
Clinical Outcomes domain beginning with the FY 2027 program year and
the technical update to the five NHSN Healthcare Associated Infection
(HAI) measures beginning with the FY 2028 program year. We also are
proposing to update and codify the ECE policy to clarify that CMS has
the discretion to grant an extension in response to an ECE request from
a hospital. We are also proposing to remove the Program's Health Equity
Adjustment. Lastly, we provide previously and newly established
performance standards for the FY 2028 through FY 2031 program years for
the Hospital VBP Program.
e. Hospital Inpatient Quality Reporting (IQR) Program
Under section 1886(b)(3)(B)(viii) of the Act, subsection (d)
hospitals are required to report data on measures selected by the
Secretary for a fiscal year in order to receive the full annual
percentage increase. In this FY 2026 IPPS/LTCH PPS proposed rule, we
are proposing several changes to the Hospital IQR Program. We are
proposing refinements to four measures currently in the Hospital IQR
Program measure set: (1) Hospital-Level, Risk-Standardized Complication
Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA)
and/or Total Knee Arthroplasty (TKA) beginning with the April 1, 2023-
March 30, 2025 Reporting Period/2027 Payment Determination; (2)
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR)
Following Acute Ischemic Stroke Hospitalization with Claims-Based Risk
Adjustment for Stroke Severity beginning with the July 1, 2023-June 30,
2025 Reporting Period/2027 Payment Determination; (3) the Hybrid
Hospital-Wide Readmission (HWR) measure beginning with the July 1,
2025, through June 30, 2026 Reporting Period/FY 2028 Payment
Determination; and (4) the Hybrid Hospital-Wide All-Cause Risk
Standardized Mortality (HWM) measure beginning with the July 1, 2025,
through June 30, 2026 Reporting Period/FY 2028 Payment Determination.
We are also proposing to remove four measures: (1) the Hospital
Commitment to Health Equity measure beginning with the CY 2024
reporting period/FY 2026 payment determination; (2) the COVID-19
Vaccination Coverage among HCP measure beginning with the CY 2024
reporting period/FY 2026 payment determination; (3) the Screening for
Social Drivers of Health measure beginning with the CY 2024 reporting
period/FY 2026 payment determination; and (4) the Screen Positive Rate
for Social Drivers of Health measure beginning with the CY 2024
reporting period/FY 2026 payment determination. We are proposing to
update and codify the ECE policy to clarify that CMS has the discretion
to grant an extension in response to an ECE request from a hospital.
Additionally, we seek comments regarding measure concepts related to
well-being and nutrition for future consideration. We also seek
comments on the path forward for digital quality measurement and use of
Fast Healthcare Interoperability Resources (FHIR).
f. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
Section 1866(k)(1) of the Act requires, for purposes of FY 2014 and
each subsequent fiscal year, that a hospital described in section
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH)
submit data in accordance with section 1866(k)(2) of the Act with
respect to such fiscal year. In the FY 2026 IPPS/LTCH PPS proposed
rule, we are proposing to publicly report PCH data on both the Provider
Data Catalog and on Care Compare and to make corresponding changes to
regulatory text to replace references to ``Provider Data Catalog'' with
``CMS website''. We are also proposing to remove the (1) Hospital
Commitment to Health Equity, (2) the Screening for Social Drivers of
Health measure; and (3) the Screen Positive Rate for Social Drivers of
Health measure beginning with the CY 2024 reporting period/FY 2026
payment determination. Lastly, we are proposing to update and codify
the ECE policy to clarify that CMS has the discretion to grant an
extension in response to an ECE request from a hospital.
g. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
In the LTCH QRP, we are proposing to remove five items from the
LCDS. We are also proposing to amend the reconsideration request
process in the LTCH QRP. Finally, we include Requests for Information
(RFIs) on: (1) future measure concepts for the LTCH QRP; (2) revisions
to the data submission deadlines for assessment data collected for the
LTCH QRP; and (3) advancing digital quality measurement (dQM) in the
LTCH QRP.
h. Medicare Promoting Interoperability Program
Under sections 1886(b)(3)(B)(ix) and 1814(l)(4) of the Act,
respectively, eligible hospitals and CAHs are required to submit data
in accordance with section 1886(n) to successfully demonstrate
meaningful use of CEHRT for an EHR reporting period to avoid a downward
payment adjustment under Medicare for the associated fiscal year. We
are proposing several changes to the Medicare Promoting
Interoperability Program. Specifically, we are proposing: (1) to amend
the definition of ``EHR reporting period for a payment adjustment
year'' at 42 CFR 495.4 for eligible hospitals and CAHs participating in
the Medicare Promoting Interoperability Program to define the EHR
reporting period in CY 2026 and subsequent years as a minimum of any
continuous 180-day period within that calendar year; (2) to modify the
Security Risk Analysis measure to require eligible hospitals and CAHs
to attest ``yes'' to having conducted security risk management in
addition to the existing measure requirement to attest ``yes'' to
having conducted security risk analysis, beginning with the EHR
reporting period in CY 2026; (3) to modify the SAFER Guides measure by
requiring eligible hospitals and CAHs to attest ``yes'' to completing
an annual self-assessment using the eight SAFER Guides published in
January 2025, beginning with the EHR reporting period in CY 2026; and
(4) to add an optional bonus measure to the Public Health and Clinical
Data Exchange objective for eligible hospitals and CAHs that submit
health information to a public health agency (PHA) using the Trusted
Exchange Framework and Common Agreement\TM\ (TEFCA), and consistent
with other measure requirements, beginning with the EHR reporting
period in CY 2026.
[[Page 18007]]
i. Transforming Episode Accountability Model (TEAM)
In section XI.A. of the preamble of this proposed rule, we propose
changes to the Transforming Episode Accountability Model (TEAM). TEAM
is a 5-year mandatory model that will be tested under the authority of
section 1115A of the Act, beginning on January 1, 2026, and ending on
December 31, 2030. We are proposing changes to multiple areas of the
model, including: (1) a limited deferment period for certain hospitals;
(2) addressing the expiration of the Medicare Dependent Hospital
program; (3) adding the Information Transfer Patient Reported Outcome-
based Performance Measure (Information Transfer PRO-PM); (4) applying a
neutral quality measure score for TEAM participants with insufficient
quality data; (5) a methodology to construct target prices when there
are coding changes; (6) reconstructing the normalization factor and
prospective trend factor; (7) replacing the Area Deprivation Index
(ADI) with the Community Deprivation Index (CDI); (8) using a 180-day
lookback period and Hierarchical Condition Categories (HCC) version 28
for beneficiary risk adjustment; (9) aligning the date range used for
episode attribution; (10) removing health equity plans and health
related social needs data reporting; (11) expanding the Skilled Nursing
Facility (SNF) 3-day rule waiver; and (12) removing the Decarbonization
and Resilience Initiative (DRI).
3. Summary of Costs and Benefits
The following table provides a summary of the costs, savings, and
benefits associated with the major provisions described in section
I.A.2. of the preamble of this proposed rule.
------------------------------------------------------------------------
Description of costs, transfers, savings,
Provision description and benefits
------------------------------------------------------------------------
Proposed Transition for the As discussed in section III.F.7. of the
Discontinuation of the Low preamble of this proposed rule, we are
Wage Index Hospital Policy. proposing to use our authority under
section 1886(d)(5)(I)(i) of the Act to
adopt a narrow transitional exception to
the calculation of FY 2026 IPPS payments
for low wage index hospitals
significantly impacted by the
discontinuation of the low wage index
hospital policy, that would be
implemented in a budget neutral manner.
We proposed to make this policy budget
neutral through an adjustment applied to
the standardized amounts for all
hospitals.
Proposed Update to the IPPS As discussed in section IV. of the
Labor-Related Share. preamble of this proposed rule, we are
proposing to rebase and revise the 2018-
based IPPS market basket to reflect a
2023 base year. In addition, using the
cost category weights from the proposed
2023-based IPPS market basket, we
calculated a labor-related share of 66.0
percent, which we are proposing to use
for discharges occurring on or after
October 1, 2025. The proposed labor-
related share of 66.0 percent is 1.6
percentage points lower than the current
labor-related share of 67.6 percent.
This proposed change is budget neutral.
Proposed Update to the IPPS As discussed in Appendix A of this
Payment Rates and Other proposed rule, acute care hospitals are
Payment Policies. estimated to experience an increase of
approximately $4.0 billion in FY 2026,
primarily driven by the changes in FY
2026 operating payments, uncompensated
care payments, and capital payments and
the expiration of the temporary changes
in the low-volume hospital program and
the expiration of the MDH program on
October 1, 2025.
Proposed Update to the LTCH As discussed in Appendix A of this
PPS Payment Rates and Other proposed rule, based on the best
Payment Policies. available data for the 328 LTCHs in our
database, we estimate that the proposed
changes to the payment rates and factors
that we present in the preamble of and
Addendum of this proposed rule, which
reflect the proposed update to the LTCH
PPS standard Federal payment rate for FY
2026, would result in an estimated
increase in payments in FY 2026 of
approximately $61 million.
Changes to the Hospital We estimated that our changes for the
Readmission Reduction Hospital Readmissions Reduction Program
Program. will result in no financial impact for
the FY 2027 payment determination or
subsequent years.
Changes to the Value-Based We estimated that there will be no net
Incentive Payments under the financial impact to the Hospital VBP
Hospital VBP Program. Program for the FY 2026 program year in
the aggregate because, by law, the
amount available for value-based
incentive payments under the program in
a given year must be equal to the total
amount of base operating MS-DRG payment
amount reductions for that year, as
estimated by the Secretary. The
estimated amount of base operating MS-
DRG payment amount reductions for the FY
2026 program year and, therefore, the
estimated amount available for value-
based incentive payments for FY 2026
discharges is approximately $1.7
billion.
Proposed Changes to the HAC We estimated that our changes for the HAC
Reduction Program. Reduction Program will result in no
financial impact for the FY 2027 payment
determination or subsequent years.
Changes to the Hospital IQR Across 3,050 IPPS hospitals, we estimated
Program. that our changes for the Hospital IQR
Program will result in a maximum
decrease of 660,577 hours and
$18,008,959 to the information
collection burden for the FY 2026
payment determination or subsequent
years.
Proposed Changes to the PCHQR Across 11 PCHs, we estimated that our
Program. changes for the PCHQR Program will
result in a maximum decrease of 153
hours and $7,765 to the information
collection burden for the FY 2026
program year or subsequent years.
Changes to the LTCH QRP...... Across 330 LTCHs, we estimated that our
proposed changes for the FY 2026 LTCH
QRP would result in a total information
collection burden increase of 4 hours
and $187.60 associated with updates to
our reconsideration policy. We estimated
that our proposed changes for the FY
2028 LTCH QRP would result in a decrease
of 2,633.51 hours associated with our
policies and updated burden estimates
and a total cost decrease of
approximately $180,016.80.
Changes to the Medicare Across 4,550 eligible hospitals and CAHs,
Promoting Interoperability we estimated that our changes for the
Program. Medicare Promoting Interoperability
Program will not result in a change to
the information collection burden for
the EHR reporting period in CY 2026 and
subsequent years.
Transforming Episode We estimate for the TEAM proposals
Accountability Model (TEAM). included in this proposed rule that
there would be no significant change
from the savings estimate in the FY 2025
IPPS/LTCH PPS final rule. Therefore, we
estimate testing TEAM would result in
saving the Medicare program $481 million
across the 5 performance years.
------------------------------------------------------------------------
B. Background Summary
1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
Section 1886(d) of the Act sets forth a system of payment for the
operating costs of acute care hospital inpatient stays under Medicare
Part A (Hospital Insurance) based on prospectively set rates. Section
1886(g) of the Act requires the Secretary to use a prospective payment
system (PPS) to pay for the capital-related costs of inpatient hospital
services for these ``subsection (d) hospitals.'' Under these PPSs,
Medicare payment for hospital inpatient operating and capital-related
costs is made at predetermined, specific rates for each hospital
discharge. Discharges are classified according to a list of diagnosis-
related groups (DRGs).
The base payment rate is comprised of a standardized amount that is
divided into a labor-related share and a nonlabor-related share. The
labor-related share is adjusted by the wage index applicable to the
area where the hospital is located. If the hospital is located in
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment (COLA) factor. This base payment rate is multiplied
by the DRG relative weight.
If the hospital treats a high percentage of certain low-income
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the
disproportionate share hospital (DSH) adjustment, provides for a
percentage increase in Medicare payments to hospitals that qualify
under either of two statutory formulas designed to identify hospitals
that serve a disproportionate share of low-income
[[Page 18008]]
patients. For qualifying hospitals, the amount of this adjustment
varies based on the outcome of the statutory calculations. The
Affordable Care Act revised the Medicare DSH payment methodology and
provides for an additional Medicare payment beginning on October 1,
2013, that considers the amount of uncompensated care furnished by the
hospital relative to all other qualifying hospitals.
If the hospital is training residents in an approved residency
program(s), it receives a percentage add-on payment for each case paid
under the IPPS, known as the indirect medical education (IME)
adjustment. This percentage varies, depending on the ratio of residents
to beds.
Additional payments may be made for cases that involve new
technologies or medical services that have been approved for special
add-on payments. In general, to qualify, a new technology or medical
service must demonstrate that it is a substantial clinical improvement
over technologies or services otherwise available, and that, absent an
add-on payment, it would be inadequately paid under the regular DRG
payment. In addition, certain transformative new devices and certain
antimicrobial products may qualify under an alternative inpatient new
technology add-on payment pathway by demonstrating that, absent an add-
on payment, they would be inadequately paid under the regular DRG
payment.
The costs incurred by the hospital for a case are evaluated to
determine whether the hospital is eligible for an additional payment as
an outlier case. This additional payment is designed to protect the
hospital from large financial losses due to unusually expensive cases.
Any eligible outlier payment is added to the DRG-adjusted base payment
rate, plus any DSH, IME, and new technology or medical service add-on
adjustments and, beginning in FY 2023 for IHS and Tribal hospitals and
hospitals located in Puerto Rico, the new supplemental payment.
Although payments to most hospitals under the IPPS are made on the
basis of the standardized amounts, some categories of hospitals are
paid in whole or in part based on their hospital-specific rate, which
is determined from their costs in a base year. For example, sole
community hospitals (SCHs) receive the higher of a hospital-specific
rate based on their costs in a base year (the highest of FY 1982, FY
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the
standardized amount. SCHs are the sole source of care in their areas.
Specifically, section 1886(d)(5)(D)(iii) of the Act defines an SCH as a
hospital that is located more than 35 road miles from another hospital
or that, by reason of factors such as an isolated location, weather
conditions, travel conditions, or absence of other like hospitals (as
determined by the Secretary), is the sole source of hospital inpatient
services reasonably available to Medicare beneficiaries. In addition,
certain rural hospitals previously designated by the Secretary as
essential access community hospitals are considered SCHs.
With the recent enactment of section 2202 of the Full-Year
Continuing Appropriations and Extensions Act, 2025, under current law,
the Medicare-dependent, small rural hospital (MDH) program is effective
through September 30, 2025. For discharges occurring on or after
October 1, 2007, but before October 1, 2025, an MDH receives the higher
of the Federal rate or the Federal rate plus 75 percent of the amount
by which the Federal rate is exceeded by the highest of its FY 1982, FY
1987, or FY 2002 hospital-specific rate. MDHs are a major source of
care for Medicare beneficiaries in their areas. Section
1886(d)(5)(G)(iv) of the Act defines an MDH as a hospital that is
located in a rural area (or, as amended by the Bipartisan Budget Act of
2018, a hospital located in a State with no rural area that meets
certain statutory criteria), has not more than 100 beds, is not an SCH,
and has a high percentage of Medicare discharges (not less than 60
percent of its inpatient days or discharges in its cost reporting year
beginning in FY 1987 or in two of its three most recently settled
Medicare cost reporting years). As section 2202 of the Full-Year
Continuing Appropriations and Extensions Act, 2025 extended the MDH
program through FY 2025 only, beginning on October 1, 2025, the MDH
program will no longer be in effect absent a change in law. Because the
MDH program is not authorized by statute beyond September 30, 2025,
beginning October 1, 2025, all hospitals that previously qualified for
MDH status under section 1886(d)(5)(G) of the Act will no longer have
MDH status and will be paid based on the IPPS Federal rate.
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient hospital services in accordance with
a prospective payment system established by the Secretary. The basic
methodology for determining capital prospective payments is set forth
in our regulations at 42 CFR 412.308 and 412.312. Under the capital
IPPS, payments are adjusted by the same DRG for the case as they are
under the operating IPPS. Capital IPPS payments are also adjusted for
IME and DSH, similar to the adjustments made under the operating IPPS.
In addition, hospitals may receive outlier payments for those cases
that have unusually high costs.
The existing regulations governing payments to hospitals under the
IPPS are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
Under section 1886(d)(1)(B) of the Act, as amended, certain
hospitals and hospital units are excluded from the IPPS. These
hospitals and units are: Inpatient rehabilitation facility (IRF)
hospitals and units; long-term care hospitals (LTCHs); Inpatient
psychiatric hospitals (IPF) and units; children's hospitals; cancer
hospitals; extended neoplastic disease care hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa). Religious nonmedical
health care institutions (RNHCIs) are also excluded from the IPPS.
Various sections of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-
33), the Medicare, Medicaid and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA, Pub.
L. 106-113), and the Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000 (BIPA, Pub. L. 106-554) provide for the
implementation of PPSs for IRF hospitals and units, LTCHs, and
psychiatric hospitals and units (referred to as inpatient psychiatric
facilities (IPFs)). (We note that the annual updates to the LTCH PPS
are included along with the IPPS annual update in this document.
Updates to the IRF PPS and IPF PPS are issued as separate documents.)
Children's hospitals, cancer hospitals, hospitals located outside the
50 States, the District of Columbia, and Puerto Rico (that is,
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa), and RNHCIs continue to be paid
solely under a reasonable cost-based system, subject to a rate-of-
increase ceiling on inpatient operating costs. Similarly, extended
neoplastic disease care hospitals are paid on a reasonable cost basis,
subject to a rate-of-increase ceiling on inpatient operating costs.
The existing regulations governing payments to excluded hospitals
and hospital units are located in 42 CFR parts 412 and 413.
[[Page 18009]]
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
The Medicare prospective payment system (PPS) for LTCHs applies to
hospitals described in section 1886(d)(1)(B)(iv) of the Act, effective
for cost reporting periods beginning on or after October 1, 2002. The
LTCH PPS was established under the authority of sections 123 of the
BBRA and section 307(b) of the BIPA (as codified under section
1886(m)(1) of the Act). Section 1206(a) of the Pathway for SGR Reform
Act of 2013 (Pub. L. 113-67) established the site neutral payment rate
under the LTCH PPS, which made the LTCH PPS a dual rate payment system
beginning in FY 2016. Under this statute, effective for LTCH's cost
reporting periods beginning in FY 2016 cost reporting period, LTCHs are
generally paid for discharges at the site neutral payment rate unless
the discharge meets the patient criteria for payment at the LTCH PPS
standard Federal payment rate. The existing regulations governing
payment under the LTCH PPS are located in 42 CFR part 412, subpart O.
Beginning October 1, 2009, we issue the annual updates to the LTCH PPS
in the same documents that update the IPPS.
4. Critical Access Hospitals (CAHs)
Under sections 1814(l), 1820, and 1834(g) of the Act, payments made
to critical access hospitals (CAHs) (that is, rural hospitals or
facilities that meet certain statutory requirements) for inpatient and
outpatient services are generally based on 101 percent of reasonable
cost. Reasonable cost is determined under the provisions of section
1861(v) of the Act and existing regulations under 42 CFR part 413.
5. Payments for Graduate Medical Education (GME)
Under section 1886(a)(4) of the Act, costs of approved educational
activities are excluded from the operating costs of inpatient hospital
services. Hospitals with approved graduate medical education (GME)
programs are paid for the direct costs of GME in accordance with
section 1886(h) of the Act. The amount of payment for direct GME costs
for a cost reporting period is based on the hospital's number of
residents in that period and the hospital's costs per resident in a
base year. The existing regulations governing payments to the various
types of hospitals are located in 42 CFR part 413. Section
1886(d)(5)(B) of the Act provides that prospective payment hospitals
that have residents in an approved GME program receive an additional
payment for each Medicare discharge to reflect the higher patient care
costs of teaching hospitals relative to non-teaching hospitals. The
additional payment is based on the indirect medical education (IME)
adjustment factor, which is calculated using a hospital's ratio of
residents to beds and a multiplier, which is set by Congress. Section
1886(d)(5)(B)(ii)(XII) of the Act provides that, for discharges
occurring during FY 2008 and fiscal years thereafter, the IME formula
multiplier is 1.35. The regulations regarding the indirect medical
education (IME) adjustment are located at 42 CFR 412.105.
C. Summary of Provisions of Recent Legislation That Would Be
Implemented in This Proposed Rule
1. The Full-Year Continuing Appropriations and Extensions Act, 2025
(Pub. L. 119-4)
Section 2201 of the Full-Year Continuing Appropriations and
Extensions Act, 2025 extended through FY 2025 the modified definition
of a low-volume hospital and the methodology for calculating the
payment adjustment for low-volume hospitals that had been in effect for
FYs 2019 through 2024. Specifically, under section 1886(d)(12)(C)(i) of
the Act, as amended, for FYs 2019 through 2025, a subsection (d)
hospital qualifies as a low-volume hospital if it is more than 15 road
miles from another subsection (d) hospital and has less than 3,800
total discharges during the fiscal year. Under section 1886(d)(12)(D)
of the Act, as amended, for discharges occurring in FYs 2019 through
September 30, 2025, the Secretary determines the applicable percentage
increase using a continuous, linear sliding scale ranging from an
additional 25 percent payment adjustment for low-volume hospitals with
500 or fewer discharges to a zero percent additional payment for low-
volume hospitals with more than 3,800 discharges in the fiscal year.
Section 2202 of the Full-Year Continuing Appropriations and
Extensions Act, 2025 amended sections 1886(d)(5)(G)(i) and
1886(d)(5)(G)(ii)(II) of the Act to provide for an extension of the MDH
program through FY 2025 (that is, through September 30, 2025).
D. Summary of the Proposed Provisions
In this proposed rule, we set forth proposed payment and policy
changes to the Medicare IPPS for FY 2026 operating costs and capital-
related costs of acute care hospitals and certain hospitals and
hospital units that are excluded from IPPS. In addition, we set forth
proposed changes to the payment rates, factors, and other payment and
policy-related changes to programs associated with payment rate
policies under the LTCH PPS for FY 2026.
The following is a general summary of the changes that we are
proposing to make in this proposed rule.
1. Proposed Changes to MS-DRG Classifications and Recalibrations of
Relative Weights
In section II. of the preamble of this proposed rule, we include
the following:
Proposed changes to MS-DRG classifications based on our
yearly review for FY 2026.
Proposed recalibration of the MS-DRG relative weights.
A discussion of the proposed FY 2026 status of new
technologies approved for add-on payments for FY 2025, a presentation
of our evaluation and analysis of the FY 2026 applicants for add-on
payments for high-cost new medical services and technologies (including
public input, as directed by the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) Public Law 108-173,
obtained in a town hall meeting for applications not submitted under an
alternative pathway), and a discussion of the proposed status of FY
2026 new technology applicants under the alternative pathways for
certain medical devices and certain antimicrobial products.
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
In section III. of the preamble of this proposed rule, we propose
revisions to the wage index for acute care hospitals and the annual
update of the wage data. Specific issues addressed include, but are not
limited to, the following:
The proposed FY 2026 wage index update using wage data
from cost reporting periods beginning in FY 2022.
Calculation, analysis, and implementation of the proposed
occupational mix adjustment to the wage index for acute care hospitals
for FY 2026 based on the 2022 Occupational Mix Survey.
Proposed application of the rural, imputed and frontier
State floors, and proposed transition for the discontinuation of the
low wage index hospital policy.
Proposed revisions to the wage index for acute care
hospitals, based on hospital redesignations and reclassifications under
sections 1886(d)(8)(B), (d)(8)(E), and (d)(10) of the Act.
Proposed adjustment to the wage index for acute care
hospitals for FY 2026 based on commuting patterns of
[[Page 18010]]
hospital employees who reside in a county and work in a different area
with a higher wage index.
Proposed labor-related share for applying the FY 2026 wage
index.
3. Proposed Rebasing and Revising of the IPPS Market Baskets
In section IV. of the preamble of this proposed rule, we propose to
rebase and revise the IPPS market baskets to reflect a 2023 base year.
In section IV.B.3. of the preamble of this proposed rule, using the
cost category weights from the proposed 2023-based IPPS market basket,
we propose to use a labor-related share of 66.0 percent for the
national standardized amounts for all IPPS hospitals (including
hospitals in Puerto Rico) that have a wage index value that is greater
than 1.0000.
4. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2026
In section V. of the preamble of this proposed rule, we discuss the
following:
Proposed calculation of Factor 1 and Factor 2 of the
uncompensated care payment methodology.
Proposed methodological approach for determining Factor 3
of the uncompensated care payment for FY 2026, which is the same
methodology that was used for FY 2025.
Proposed methodological approach for determining the
amount of interim uncompensated care payments using the average of the
most recent 3 years of discharge data.
5. Other Decisions and Proposed Changes to the IPPS for Operating Costs
In section VI. of the preamble of this proposed rule, we discuss
proposed changes or clarifications of a number of the provisions of the
regulations in 42 CFR parts 412 and 413, including the following:
Proposed inpatient hospital market basket update for FY
2026.
Proposed updated national and regional case-mix values and
discharges for purposes of determining RRC status.
Proposed conforming amendments to reflect the statutory
extension of the temporary changes to the low-volume hospital payment
adjustment through September 30, 2025.
Proposed conforming amendments to reflect the statutory
extension of the MDH program through September 30, 2025.
A direct graduate medical education (GME) and indirect
medical education (IME) policy proposal for calculating full-time
equivalent counts and caps for cost reporting periods other than 12
months; and a notice of closure of two teaching hospitals and
opportunities to apply for available slots.
Proposed nursing and allied health education (NAHE)
program Medicare Advantage (MA) add-on rates and direct GME MA percent
reductions for CY 2024; and proposed regulatory changes regarding the
calculation of net cost of NAHE.
Proposed update to and revision to the payment adjustment
for certain immunotherapy cases.
Proposed changes to the requirements of the Hospital
Readmissions Reduction Program--Updating the proposed estimate of the
financial impacts for the FY 2026 Hospital Readmissions Reduction
Program.
Proposed changes to the requirements of the Hospital
Value-Based Purchasing Program--Updating the proposed estimate of the
financial impacts for the FY 2026 Hospital Value-Based Purchasing
Program.
Proposed changes to the requirements of the Hospital-
Acquired Conditions Reduction Program--Updating the proposed estimate
of the financial impacts for the FY 2026 Hospital-Acquired Conditions
Reduction Program.
Discussion of and proposed changes relating to the
implementation of the Rural Community Hospital Demonstration Program in
FY 2025.
6. Proposed FY 2026 Policy Governing the IPPS for Capital-Related Costs
In section VII. of the preamble of the proposed rule, we discuss
the proposed payment policy requirements for capital-related costs and
capital payments to hospitals for FY 2025.
7. Proposed Changes to the Payment Rates for Certain Excluded
Hospitals: Rate-of-Increase Percentages
In section VIII. of the preamble of the proposed rule, we discuss
the following:
Proposed changes to payments to certain excluded hospitals
for FY 2026.
Proposed continued implementation of the Frontier
Community Health Integration Project (FCHIP) Demonstration.
8. Proposed Changes to the LTCH PPS
In section IX. of the preamble of the proposed rule, we set forth
proposed changes to the LTCH PPS Federal payment rates, factors, and
other payment rate policies under the LTCH PPS for FY 2026.
9. Proposed Changes Relating to Quality Data Reporting for Specific
Providers and Suppliers
In section X. of the preamble of the proposed rule, we addressed
the following:
Solicitation of comment on adopting measures across the
hospital quality reporting and value-based purchasing programs which
capture more forms of unplanned post-acute care and encourage hospitals
to improve discharge processes.
Proposed changes to the requirements for the Hospital IQR
Program.
Proposed changes to the requirements for the PCHQR
Program.
Proposed changes to the requirements for the LTCH QRP, and
requests for information on future measure concepts, revisions to the
data submission deadlines for assessment data collection, and advancing
digital quality measurement (dQM) in the LTCH QRP.
Proposed changes to requirements pertaining to eligible
hospitals and CAHs participating in the Medicare Promoting
Interoperability Program.
10. Other Proposals and Comment Solicitations Included in the Proposed
Rule
Section XI. of the preamble of the proposed rule includes proposed
changes to TEAM that would affect participation, quality measure and
assessment, pricing methodology, health data reporting, waivers of
Medicare Program requirements, and the Decarbonization and Resilience
Initiative.
11. Other Provisions of the Proposed Rule
Section XII.A. of the preamble of the proposed rule includes our
discussion of the MedPAC Recommendations.
Section XII.B. of the preamble of the proposed rule includes a
descriptive listing of the public use files associated with this
proposed rule.
Section XIII. of the preamble of the proposed rule includes the
collection of information requirements for entities based on our
proposals.
Section XIV. of the preamble of the proposed rule includes
information regarding our responses to public comments.
12. Determining Prospective Payment Operating and Capital Rates and
Rate-of-Increase Limits for Acute Care Hospitals
In sections II. and III. of the Addendum of the proposed rule, we
set forth proposed changes to the amounts and factors for determining
the
[[Page 18011]]
proposed FY 2026 prospective payment rates for operating costs and
capital-related costs for acute care hospitals, including cost-of-
living adjustment (COLA) factors for IPPS hospitals located in Alaska
and Hawaii. We are proposing to establish the threshold amounts for
outlier cases. In addition, in section IV. of the Addendum of the
proposed rule, we address the proposed update factors for determining
the rate-of-increase limits for cost reporting periods beginning in FY
2026 for certain hospitals excluded from the IPPS.
13. Determining Prospective Payment Rates for LTCHs
In section V. of the Addendum of the proposed rule, we set forth
proposed changes to the amounts and factors for determining the
proposed FY 2026 LTCH PPS standard Federal payment rate and other
factors used to determine LTCH PPS payments under both the LTCH PPS
standard Federal payment rate and the site neutral payment rate in FY
2026. We are proposing to establish the adjustments for the wage index,
labor-related share, the cost-of-living adjustment, and high-cost
outliers, including the applicable fixed-loss amounts and the LTCH
cost-to-charge ratios (CCRs) for both payment rates.
14. Impact Analysis
In Appendix A of this proposed rule, we set forth an analysis of
the impact the proposed changes would have on affected acute care
hospitals, LTCHs, and other entities.
15. Recommendation of Update Factors for Operating Cost Rates of
Payment for Hospital Inpatient Services
In Appendix B of this proposed rule, as required by sections
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the
appropriate percentage changes for FY 2026 for the following:
A single average standardized amount for all areas for
hospital inpatient services paid under the IPPS for operating costs of
acute care hospitals (and hospital-specific rates applicable to SCHs
and MDHs).
Target rate-of-increase limits to the allowable operating
costs of hospital inpatient services furnished by certain hospitals
excluded from the IPPS.
The LTCH PPS standard Federal payment rate and the site
neutral payment rate for hospital inpatient services provided for LTCH
PPS discharges.
16. Discussion of Medicare Payment Advisory Commission Recommendations
Under section 1805(b) of the Act, MedPAC is required to submit a
report to Congress, no later than March 15 of each year, in which
MedPAC reviews and makes recommendations on Medicare payment policies.
MedPAC's March 2025 recommendations concerning hospital inpatient
payment policies address the update factor for hospital inpatient
operating costs and capital-related costs for hospitals under the IPPS.
We address these recommendations in Appendix B of this proposed rule.
For further information relating specifically to the MedPAC March 2024
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's website at https://www.medpac.gov.
II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS-
DRG) Classifications and Relative Weights
A. Background
Section 1886(d) of the Act specifies that the Secretary shall
establish a classification system (referred to as diagnosis-related
groups (DRGs)) for inpatient discharges and adjust payments under the
IPPS based on appropriate weighting factors assigned to each DRG.
Therefore, under the IPPS, Medicare pays for inpatient hospital
services on a rate per discharge basis that varies according to the DRG
to which a beneficiary's stay is assigned. The formula used to
calculate payment for a specific case multiplies an individual
hospital's payment rate per case by the weight of the DRG to which the
case is assigned. Each DRG weight represents the average resources
required to care for cases in that particular DRG, relative to the
average resources used to treat cases in all DRGs.
Section 1886(d)(4)(C) of the Act requires that the Secretary adjust
the DRG classifications and relative weights at least annually to
account for changes in resource consumption. These adjustments are made
to reflect changes in treatment patterns, technology, and any other
factors that may change the relative use of hospital resources.
B. Adoption of the MS-DRGs and MS-DRG Reclassifications
For information on the adoption of the MS-DRGs in FY 2008, we refer
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140
through 47189).
For general information about the MS-DRG system, including yearly
reviews and changes to the MS-DRGs, we refer readers to the previous
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR
43764 through 43766) and the FYs 2011 through 2025 IPPS/LTCH PPS final
rules (75 FR 50053 through 50055; 76 FR 51485 through 51487; 77 FR
53273; 78 FR 50512; 79 FR 49871; 80 FR 49342; 81 FR 56787 through
56872; 82 FR 38010 through 38085; 83 FR 41158 through 41258; 84 FR
42058 through 42165; 85 FR 58445 through 58596; 86 FR 44795 through
44961; 87 FR 48800 through 48891; 88 FR 58654 through 58787; and 89 FR
69000 through 69109, respectively).
For discussion regarding our previously finalized policies
(including our historical adjustments to the payment rates) relating to
the effect of changes in documentation and coding that do not reflect
real changes in case mix, we refer readers to the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48799 through 48800).
C. Proposed Changes to Specific MS-DRG Classifications
1. Discussion of Changes to Coding System and Basis for Proposed FY
2026 MS-DRG Updates
a. International Classification of Diseases, 10th Revision (ICD-10)
Providers use the International Classification of Diseases, 10th
Revision (ICD-10) coding system to report diagnoses and procedures for
Medicare hospital inpatient services under the MS-DRG system. The ICD-
10 coding system includes the International Classification of Diseases,
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding
and the International Classification of Diseases, 10th Revision,
Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure
coding, as well as the ICD-10-CM and ICD-10-PCS Official Guidelines for
Coding and Reporting.
b. Basis for Proposed FY 2026 MS-DRG Updates
The deadline for interested parties to submit MS-DRG classification
change requests for FY 2026 was October 20, 2024. All requests are
submitted to CMS via Medicare Electronic Application Request
Information SystemTM (MEARISTM), accessed at
https://mearis.cms.gov. Specifically, as indicated on the
MEARISTM site, the MS-DRG classification change request
process may be used for requests to create, modify, or delete MS-DRGs,
[[Page 18012]]
change ICD-10-CM diagnosis code(s) severity level designations, change
ICD-10-PCS procedure code(s) Operating Room (O.R.) designations, or to
review the CC Exclusions List or the surgical hierarchy.
Within MEARISTM, we have built in several resources to
support users, including a ``Resources'' section available at https://mearis.cms.gov/public/resources with technical support available under
``Useful Links'' at the bottom of the MEARISTM site.
Questions regarding the MEARISTM system can be submitted to
CMS using the form available under ``Contact'', also at the bottom of
the MEARISTM site.
We note that the burden associated with this information collection
requirement is the time and effort required to collect and submit the
data in the request for MS-DRG classification changes to CMS. The
aforementioned burden is subject to the Paperwork Reduction Act (PRA)
of 1995 and approved under OMB control number 0938-1431 and has an
expiration date of 09/30/2025.
Interested parties should submit any MS-DRG classification change
requests, including any comments and suggestions for FY 2027
consideration by October 20, 2025 via MEARISTM at: https://mearis.cms.gov/public/home.
As we have discussed in prior rulemaking, we may not be able to
fully consider all of the requests that we receive for the upcoming
fiscal year. We have found that, with the implementation of ICD-10,
some types of requested changes to the MS-DRG classifications require
more extensive research to identify and analyze all of the data that
are relevant to evaluating the potential change. We note in the
discussion that follows those topics for which further research and
analysis are required, and which we will continue to consider in
connection with future rulemaking. We further note that we also
received recommendations and feedback that did not involve requests to
create, modify, or delete MS-DRGs, change code designations, or to
review the CC Exclusions List or the surgical hierarchy, which
therefore are not summarized or addressed in this discussion of the MS-
DRG classification change requests received for FY 2026.
We received requests to modify the GROUPER logic in several MS-DRGs
under MDC 08 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue) and a request to modify the GROUPER logic for MS-DRG
794 (Neonate with Other Significant Problems) under MDC 15 (Newborns
and Other Neonates with Conditions Originating in Perinatal Period).
Specifically, we received requests to--
Modify the GROUPER logic of new MS-DRG 426 (Multiple Level
Combined Anterior and Posterior Spinal Fusion Except Cervical with MCC
or Custom-Made Anatomically Designed Interbody Fusion Device), new MS-
DRG 427 (Multiple Level Combined Anterior and Posterior Spinal Fusion
Except Cervical with CC), and new MS-DRG 428 (Multiple Level Combined
Anterior and Posterior Spinal Fusion Except Cervical without CC/MCC);
new MS-DRG 447 (Multiple Level Spinal Fusion Except Cervical with MCC
or Custom-Made Anatomically Designed Interbody Fusion Device) and new
MS-DRG 448 (Multiple Level Spinal Fusion Except Cervical without MCC);
and MS-DRGs 456, 457, and 458 (Spinal Fusion Except Cervical with
Spinal Curvature, Malignancy, Infection or Extensive Fusions with MCC,
with CC, and without CC/MCC, respectively) by reassigning cases with an
ICD-10-PCS code that describes fusion of a sacroiliac joint using an
internal fixation device with tulip connector or insertion of an
internal fixation device with tulip connector into a pelvic bone with
another spinal fusion procedure code that currently map to the lower
severity level MS-DRG to the highest severity level (with MCC) MS-DRG.
Modify the GROUPER logic of MS-DRGs 463, 464, and 465
(Wound Debridement and Skin Graft Except Hand for Musculoskeletal and
Connective Tissue Disorders with MCC, with CC, and without CC/MCC,
respectively); MS-DRGs 466, 467, and 468 (Revision of Hip or Knee
Replacement with MCC, with CC, and without CC/MCC, respectively); and
MS-DRGs 492, 493, and 494 (Lower Extremity and Humerus Procedures
Except Hip, Foot and Femur with MCC, with CC, and without CC/MCC,
respectively) by reassigning cases with ICD-10-PCS code XW0V0P7
(Introduction of antibiotic-eluting bone void filler into bones, open
approach, new technology group 7) that currently map to the lower
severity level MS-DRG to the highest severity level (with MCC) MS-DRG.
Modify the GROUPER logic of MS-DRG 794. The requestor
recommended that ICD-10-CM diagnosis codes P09.6 (Abnormal findings on
neonatal screening for neonatal hearing loss), Z13.0 (Encounter for
screening for diseases of the blood and blood-forming organs and
certain disorders involving the immune mechanism), Z82.5 (Family
history of asthma and other chronic lower respiratory diseases) and
Z82.79 (Family history of other congenital malformations, deformations
and chromosomal abnormalities), be added to the MS-DRG 795 (Normal
Newborn) ``only secondary diagnosis'' list so that they would result in
assignment to MS-DRG 795 when coded with a principal diagnosis code
from ICD-10-CM category Z38 (Liveborn infants according to place of
birth and type of delivery) instead of MS-DRG 794.
We appreciate the submissions and related analyses provided by the
requestors for our consideration as we review MS-DRG classification
change requests for FY 2026; however, we note the complexity of the
GROUPER logic for these MS-DRGs in connection with these requests
requires more extensive analyses to identify and evaluate all the data
relevant to assessing these potential modifications. Specifically, we
note that MS-DRGs 426, 427, 428, 447, and 448 recently became effective
October 1, 2024 (FY 2025) and as discussed in the FY 2025 IPPS/LTCH PPS
proposed rule (89 FR 35982 through 35983) and final rule (89 FR 69049
through 69053) in consideration of any future modifications to the
current structure of the logic for case assignment to MS-DRGs 456, 457,
and 458 we noted that additional analysis would be needed because the
logic is also defined by diagnosis code logic as well as extensive
fusions. We also note that, as discussed further in section II.C.5.c.
of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we
identified additional inconsistencies related to the diagnosis code
logic for MS-DRGs 456, 457, and 458 for which we are proposing
modifications. In addition, analyzing the impact of restructuring the
logic in these MS-DRGs with respect to procedure codes describing
fusion of a sacroiliac joint using an internal fixation device with
tulip connector necessitates evaluating the impact across numerous
other MS-DRGs in MDC 08, as well as MS-DRG 028 (Spinal Procedures with
MCC), MS-DRG 029 (Spinal Procedures with CC or Spinal
Neurostimulators), and MS-DRG 030 (Spinal Procedures without CC/MCC)
under MDC 01 (Diseases and Disorders of the Nervous System) since the
procedure codes describing fusion of a sacroiliac joint using an
internal fixation device with tulip connector also map to these MS-
DRGs.
With respect to the request to reassign cases reporting procedure
code XW0V0P7 from the lower severity level to the highest (with MCC)
severity level in the previously listed MS-DRGs, we note that the
procedure to insert a bone void filler is designated as a non-operating
room (Non-O.R.) procedure and believe that the key factor that
[[Page 18013]]
would contribute to resource utilization in these cases is the fact
that the patients have an infection(s) which require additional
resources. As discussed in section II.C.5.a. of the preamble of this FY
2026 IPPS/LTCH PPS proposed rule, we also received an MS-DRG request
related to cases reporting a hip or knee procedure with a diagnosis of
periprosthetic joint infection (PJI) in MS-DRGs 463, 464, and 465. In
our review of the claims data to address that request we noted that a
subset of the cases also reported procedure code XW0V0P7. Consistent
with our established process, we must also consider if there are
additional factors, such as the severity of illness with other
secondary CC/MCC conditions reported and any other O.R. procedures or
services provided, such as mechanical ventilation, that may be
contributing to the consumption of resources for these cases. For these
reasons and those previously described, we believe additional time is
needed to review and evaluate potential extensive modifications to the
structure of these MS-DRGs.
With respect to the request to modify the GROUPER logic of MS-DRG
794, as discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69061
through 69065), we acknowledged that MS-DRG 794 utilizes ``fall-
through'' logic, meaning if a diagnosis code is not assigned to any of
the other MS-DRGs, then assignment ``falls-through'' to MS-DRG 794. As
discussed in the FY 2025 IPPS/LTCH PPS rule, we stated we have started
to examine the GROUPER logic that would determine the assignment of
cases to the MS-DRGs in MDC 15, including MS-DRGs 794 and 795, to
determine where further refinements could potentially be made to better
account for differences in clinical complexity and resource
utilization. However, as we have noted in prior rulemaking (72 FR
47152), we stated we cannot adopt the same approach to refine the
newborn MS-DRGs because of the extremely low volume of Medicare
patients there are in these MS-DRGs. We believe it is appropriate to
consider the request to add ICD-10-CM diagnosis codes P09.6 (Abnormal
findings on neonatal screening for neonatal hearing loss), Z13.0
(Encounter for screening for diseases of the blood and blood-forming
organs and certain disorders involving the immune mechanism), Z82.5
(Family history of asthma and other chronic lower respiratory diseases)
and Z82.79 (Family history of other congenital malformations,
deformations and chromosomal abnormalities) to the MS-DRG 795 (Normal
Newborn) ``only secondary diagnosis'' list in connection with our
continued examination of the GROUPER logic that would determine the
assignment of cases to the MS-DRGs in MDC 15 in future rulemaking,
rather than proposing to change the MS-DRG assignment of individual
ICD-10-CM diagnosis codes at this time. Additional time is needed to
fully and accurately evaluate cases currently grouping to the MS-DRGs
in MDC 15 to consider if restructuring the current MS-DRGs would better
recognize the clinical distinctions of these patient populations.
We will continue to monitor the data as we consider these issues in
connection with future rulemaking. As we continue the analysis of the
claims data with respect to MS-DRGs in MDC 08, MDC 01, and MDC 15, we
welcome public comments and feedback on other factors that should be
considered in the potential restructuring of these MS-DRGs. Feedback
and other suggestions may be directed to MEARISTM at:
https://mearis.cms.gov/public/home. As noted, interested parties should
submit any MS-DRG classification change requests, including any
comments and suggestions for FY 2027 consideration by October 20, 2025
via MEARISTM at: https://mearis.cms.gov/public/home.
As we did for the FY 2025 IPPS/LTCH PPS proposed rule, for this FY
2026 IPPS/LTCH PPS proposed rule we are providing a test version of the
ICD-10 MS-DRG GROUPER Software, Version 43, so that the public can
better analyze and understand the impact of the proposals included in
this FY 2026 IPPS/LTCH PPS proposed rule. We note that this test
software reflects the proposed GROUPER logic for FY 2026. Therefore, it
includes the new diagnosis and procedure codes that are effective for
FY 2026 as reflected in Table 6A.--New Diagnosis Codes--FY 2026 and
Table 6B.--New Procedure Codes--FY 2026 associated with this FY 2026
IPPS/LTCH PPS proposed rule and does not include the diagnosis codes
that are invalid beginning in FY 2026 as reflected in Table 6C.--
Invalid Diagnosis Codes--FY 2026 and Table 6D.--Invalid Procedure
Codes--FY 2026 associated with this FY 2026 IPPS/LTCH PPS proposed
rule. These tables are not published in the Addendum to this FY 2026
IPPS/LTCH PPS proposed rule, but are available on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the
Addendum to this FY 2026 IPPS/LTCH PPS proposed rule. Because the
diagnosis and procedure codes no longer valid for FY 2026 are not
reflected in the test software, we are making available a supplemental
file in Table 6P.1a that includes the mapped Version 43 FY 2026 ICD-10-
CM codes and the deleted Version 42 FY 2025 ICD-10-CM codes and Table
6P.1b that includes the mapped Version 43 FY 2026 ICD-10-PCS codes and
the deleted Version 42.1 FY 2025 ICD-10-PCS codes that should be used
for testing purposes with users' available claims data. Therefore,
users will have access to the test software allowing them to build case
examples that reflect the proposals included in this FY 2026 IPPS/LTCH
PPS proposed rule. In addition, users will be able to view the draft
version of the ICD-10 MS-DRG Definitions Manual, Version 43 that
contains the documentation for proposed FY 2026 ICD-10 MS-DRG GROUPER
Version 43 logic changes and will also be able to view a draft version
of the Definitions of Medicare Code Edits (MCE) Manual to review any
changes that will become effective October 1 for FY 2026. As a result
of new and modified code updates approved after the annual spring ICD-
10 Coordination and Maintenance Committee meeting, any further changes
to the MCE will be reflected in the finalized Definitions of Medicare
Code Edits (MCE) Manual, made available in association with the annual
IPPS/LTCH PPS final rule. We are making available the draft FY 2026
ICD-10 MCE Version 43 Manual file on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
The MCE manual is comprised of two chapters: Chapter 1: Edit code
lists provides a listing of each edit, an explanation of each edit, and
as applicable, the diagnosis and/or procedure codes for each edit, and
Chapter 2: Code list changes summarizes the changes in the edit code
lists (for example, additions and deletions) from the prior release of
the MCE software. The public may submit any questions, comments,
concerns, or recommendations regarding the MCE to the CMS mailbox at
[email protected] for our review and consideration.
The test version of the ICD-10 MS-DRG GROUPER Software, Version 43,
the draft version of the ICD-10 MS-DRG Definitions Manual, Version 43,
the draft version of the Definitions of Medicare Code Edits Manual,
Version 43, and the supplemental mapping files in Tables 6P.1a and
6P.1b of the FY 2025 and FY 2026 ICD-10-CM
[[Page 18014]]
diagnosis codes and ICD-10-PCS procedure codes are available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
The following are the changes that we are proposing to the MS-DRGs
for FY 2026. We are inviting public comments on each of the MS-DRG
classification proposed changes, as well as our proposals to maintain
certain existing MS-DRG classifications discussed in this FY 2026 IPPS/
LTCH PPS proposed rule. In some cases, we are proposing changes to the
MS-DRG classifications based on our analysis of claims data and
clinical appropriateness. In other cases, we are proposing to maintain
the existing MS-DRG classifications based on our analysis of claims
data and clinical appropriateness. For this FY 2026 IPPS/LTCH PPS
proposed rule, our MS-DRG analysis was based on ICD-10 claims data from
the September 2024 update of the FY 2024 MedPAR file, which contains
hospital bills received from October 1, 2023 through September 30,
2024. In our discussion of the proposed MS-DRG reclassification
changes, we refer to these claims data as the ``September 2024 update
of the FY 2024 MedPAR file.''
In deciding whether to propose to make further modifications to the
MS-DRGs for particular circumstances brought to our attention, we
consider whether the resource consumption and clinical characteristics
of the patients with a given set of conditions are significantly
different than the remaining patients represented in the MS-DRG. We
evaluate patient care costs using average costs and lengths of stay and
rely on clinical factors to determine whether patients are clinically
distinct or similar to other patients represented in the MS-DRG. In
evaluating resource costs, we consider both the absolute and percentage
differences in average costs between the cases we select for review and
the remainder of cases in the MS-DRG. We also consider variation in
costs within these groups; that is, whether observed average
differences are consistent across patients or attributable to cases
that are extreme in terms of costs or length of stay, or both. Further,
we consider the number of patients who will have a given set of
characteristics and generally prefer not to create a new MS-DRG unless
it would include a substantial number of cases.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58448), we finalized
our proposal to expand our existing criteria to create a new
complication or comorbidity (CC) or major complication or comorbidity
(MCC) subgroup within a base MS-DRG. Specifically, we finalized the
expansion of the criteria to include the NonCC subgroup for a three-way
severity level split. We stated we believed that applying these
criteria to the NonCC subgroup would better reflect resource
stratification as well as promote stability in the relative weights by
avoiding low volume counts for the NonCC level MS-DRGs. We noted that
in our analysis of MS-DRG classification requests for FY 2021 that were
received by November 1, 2019, as well as any additional analyses that
were conducted in connection with those requests, we applied these
criteria to each of the MCC, CC, and NonCC subgroups.
As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661),
we continue to apply the criteria to create subgroups, including
application of the NonCC subgroup criteria, in our annual analysis of
MS-DRG classification requests, consistent with our approach since FY
2021 when we finalized the expansion of the criteria to include the
NonCC subgroup for a three-way severity level split. Accordingly, in
our analysis of the MS-DRG classification requests for FY 2026 that we
received by October 20, 2024, as well as any additional analyses that
were conducted in connection with those requests, we applied these
criteria to each of the MCC, CC, and NonCC subgroups, as described in
the following table.
----------------------------------------------------------------------------------------------------------------
Three-way split 123 (MCC vs Two-way split 1_23 MCC Two-way split 12_3
Criteria No. CC vs NonCC) vs (CC+NonCC) (MCC+CC) vs NonCC
----------------------------------------------------------------------------------------------------------------
1. At least 500 cases in the MCC/CC/ 500+ cases for MCC group; 500+ cases for MCC 500+ cases for
NonCC group. and 500+ cases for CC group; and 500+ cases (MCC+CC) group; and
group; and 500+ cases for for (CC+NonCC) group. 500+ cases for NonCC
NonCC group. group.
2. At least 5% of the patients are 5%+ cases for MCC group; 5%+ cases for MCC 5%+ cases for (MCC+CC)
in the MCC/CC/NonCC group. and 5%+ cases for CC group; and 5%+ cases group; and 5%+ cases
group; and 5%+ cases for for (CC+NonCC) group. for NonCC group.
NonCC group.
3. There is at least a 20% 20%+ difference in average 20%+ difference in 20%+ difference in
difference in average cost between cost between MCC group and average cost between average cost between
subgroups. CC group; and 20%+ MCC group and (MCC+CC) group and
difference in average cost (CC+NonCC) group. NonCC group.
between CC group and NonCC
group.
4. There is at least a $2,000 $2,000+ difference in $2,000+ difference in $2,000+ difference in
difference in average cost between average cost between MCC average cost between average cost between
subgroups. group and CC group; and MCC group and (MCC+CC) group and
$2,000+ difference in (CC+NonCC) group. NonCC group.
average cost between CC
group and NonCC group.
5. The R2 of the split groups is R2 >3.0 for the three-way R2 >3.0 for the two- R2 >3.0 for the two-
greater than or equal to 3. split within the base MS- way 1_23 split within way 12_3 split within
DRG. the base MS-DRG. the base MS-DRG.
----------------------------------------------------------------------------------------------------------------
In general, once the decision has been made to propose to make
further modifications to the MS-DRGs as described previously, such as
creating a new base MS-DRG, or in our evaluation of a specific MS-DRG
classification request to split (or subdivide) an existing base MS-DRG
into severity levels, all five criteria must be met for the base MS-DRG
to be split (or subdivided) by a CC subgroup. We note that in our
analysis of requests to create a new MS-DRG, we typically evaluate the
most recent year of MedPAR claims data available. For example, we
stated earlier that for this FY 2026 IPPS/LTCH PPS proposed rule, our
MS-DRG analysis was based on ICD-10 claims data from the September 2024
update of the FY 2024 MedPAR file. However, in our evaluation of
requests to split an existing base MS-DRG into severity levels, as
noted in prior rulemaking (80 FR 49368), we typically analyze the most
recent two years of data. This analysis includes two years of MedPAR
claims data to compare the data results from one year to the next to
avoid making determinations about whether additional severity levels
are warranted based on an isolated year's data fluctuation and also, to
validate that the established severity levels within a base MS-DRG are
supported. The first step in our process of evaluating if the creation
of a new CC subgroup within a base MS-DRG is warranted is to determine
if all the criteria is satisfied for a three-way split. In applying the
criteria for a three-way split, a base MS-DRG is initially subdivided
into the three subgroups: MCC, CC, and NonCC. Each
[[Page 18015]]
subgroup is then analyzed in relation to the other two subgroups using
the volume (Criteria 1 and 2), average cost (Criteria 3 and 4), and
reduction in variance (Criteria 5). If the criteria fail, the next step
is to determine if the criteria are satisfied for a two-way split. In
applying the criteria for a two-way split, a base MS-DRG is initially
subdivided into two subgroups: ``with MCC'' and ``without MCC'' (1_23)
or ``with CC/MCC'' and ``without CC/MCC'' (12_3). Each subgroup is then
analyzed in relation to the other using the volume (Criteria 1 and 2),
average cost (Criteria 3 and 4), and reduction in variance (Criteria
5). If the criteria for both of the two-way splits fail, then a split
(or CC subgroup) would generally not be warranted for that base MS-DRG.
If the three-way split fails on any one of the five criteria and all
five criteria for both two-way splits (1_23 and 12_3) are met, we would
apply the two-way split with the highest R2 value. We note that if the
request to split (or subdivide) an existing base MS-DRG into severity
levels specifies the request is for either one of the two-way splits
(1_23 or 12_3), in response to the specific request, we will evaluate
the criteria for both of the two-way splits; however, we do not also
evaluate the criteria for a three-way split.
2. Pre-MDC MS-DRG 018 Chimeric Antigen Receptor (CAR) T-Cell and Other
Immunotherapies
We received a request to review the recent MS-DRG assignments to
Pre-MDC MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and Other
Immunotherapies) and to clarify how decisions for the assignment of
cell and gene therapies will be made moving forward. According to the
requestor, for FY 2025, CMS did not assign prademagene zamikeracel
(PZ), an autologous genetically engineered cell-based gene therapy, to
MS-DRGs that would create clinical homogeneity and therefore, the
mapping of these cases to MS-DRG 018 instead implied that estimated
post-approval product pricing takes precedent for cell and gene
therapies over clinical homogeneity principles. The requestor
acknowledged that CMS has previously clarified that therapies mapped to
Pre-MDC MS-DRG 018 do not need to be CAR T-cell products or utilized in
the treatment of cancer and stated it concurs with that approach.
However, the requestor indicated that the mapping of PZ to Pre-MDC MS-
DRG 018 for FY 2025 also raised the following questions:
Why was PZ mapped to Pre-MDC MS-DRG 018 when a different
product (eladocagene exuparvovec) that is also delivered via operating
room administration methods was mapped to other non-pre-MDC MS-DRGs?
Why did CMS indicate that Lantidra, a recently approved
cellular therapy, would map to the same MS-DRGs as existing insulin
delivery therapies and technologies used to treat the subset of
patients with hard-to-control Type 1 diabetes complicated by severe
hypoglycemia who cannot receive a whole pancreas transplant instead of
to Pre-MDC MS-DRG 018?
Does CMS intend a future split of Pre-MDC MS-DRG 018
between medical and surgical cell and gene therapies to recognize the
clinical resource differential between the two modalities, even if the
500 case volume threshold is not reached?
Why was a product delivered via allogeneic stem cell
transplant procedure (Orca-T) mapped to Pre-MDC MS-DRG 018 instead of
Pre-MDC MS-DRG 014 (Allogeneic Bone Marrow Transplant)?
If products delivered via stem cell transplant should be
mapped to Pre-MDC MS-DRG 018 based on resource use, per the Orca-T
example, why are multiple gene therapy products delivered via stem cell
transplant instead mapped to Pre-MDC MS-DRGs 016 and 017 (Autologous
Bone Marrow Transplant with CC/MCC and without CC/MCC, respectively)?
The requestor stated the previously listed questions illustrate
examples of inconsistencies with the MS-DRG mappings of cell and gene
therapy products in recent years. The requestor recommended that CMS
review recent MS-DRG assignments for these products and consider
refinements to the approach. The requestor also urged CMS to clarify
how decisions for cell and gene therapies will be made in the future.
The requestor stated that if the intent of CMS is for Pre-MDC MS-DRG
018 to be a broad cell and gene therapy MS-DRG then a modification to
the title of Pre-MDC MS-DRG 018 should be proposed and therapies
currently assigned to other MS-DRGs should be re-mapped.
The requestor also suggested that CMS clarify the process by which
interested parties can submit comments on potential or proposed
procedure code mappings to the MS-DRGs for code proposals discussed at
the Spring ICD-10 Coordination and Maintenance (C&M) Committee meeting
since, given the timing, proposed code assignments are not published in
association with the annual IPPS/LTCH PPS proposed rule. Specifically,
the requestor stated there is no opportunity for interested parties to
provide feedback to CMS about the assignment of new codes to Pre-MDC
MS-DRG 018. The requestor stated that because MS-DRG 018 is a Pre-MDC
MS-DRG with a limited number of procedure codes mapping to it, it is
important for interested parties to have the ability to preview
potential assignments to this MS-DRG and provide feedback to CMS prior
to any final mapping decisions being made. The requestor acknowledged
that CMS previously responded to prior comments regarding the process
of commenting on the assignment of newly created codes; however, the
requestor suggested that CMS provide additional clarification.
Specifically, the requestor stated that the primary comment period with
respect to the Spring procedure code requests is the timeframe
following the ICD-10 C&M Committee meeting and that the materials
provided in association with the meeting do not contain mapping
requests submitted by the code requestor. The requestor indicated that
if it is to assume any new procedure code request could potentially be
mapped to Pre-MDC MS-DRG 018 and submits comments accordingly, that
would create an undue burden. The requestor submitted the following
questions regarding the process by which interested parties may submit
comments on potential procedure code mappings to MS-DRGs:
Can mapping requests be submitted as part of the request
for a new ICD-10-PCS procedure code or do mapping requests need to go
through the MS-DRG modification process with an annual October
deadline?
Can CMS provide information on mapping requests as part of
the ICD-10 C&M Committee meeting materials?
Will comments submitted to the ICD-10 C&M Committee about
potential mappings be shared with the CMS teams associated with MS-DRG
mapping decisions?
Should interested parties include the same comments that
are submitted to the ICD-10 C&M Committee in their proposed rule
comments?
Will comments submitted as part of the proposed rule be
considered within scope for proposed codes presented during the spring
meeting that are subsequently finalized but not listed in Table 6A.--
New Diagnosis codes and Table 6B.--New Procedure Codes with proposed
mappings?
Do CMS' prior responses indicate that interested parties
who submit comments on procedure code mappings should request code
proposals presented at the spring meeting be delayed until the fall
meeting?
The requestor recommended that CMS address the previously listed
[[Page 18016]]
questions and seek input on the process by which interested parties may
submit comments on potential procedure code mappings.
We appreciate the requestor's feedback and suggestions regarding
the classification of therapies to Pre-MDC MS-DRG 018 and the broader
topic of MS-DRG mappings of cell and gene therapy products for the
future. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69008 through
69010), we summarized and responded to comments regarding the mapping
of procedure codes describing the application of PZ and other newly
established procedure codes to Pre-MDC MS-DRG 018. We note that we
previously addressed similar comments in the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48806 through 48807), and we also noted that we
provided detailed summaries and responses to these same or similar
comments in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44798 through
44806). We also refer the reader to the discussion in section II.D. of
this FY 2026 IPPS/LTCH PPS proposed rule, regarding the proposed
relative weight methodology for cases mapping to Pre- MDC MS-DRG 018
effective October 1, 2025, for FY 2026.
With respect to the requestor's suggestion that a modification to
the title of Pre-MDC MS-DRG 018 be proposed, we note that the requestor
did not provide a specific recommendation for FY 2026 consideration;
however, we acknowledge that there has been discussion related to
requests to revise the title to Pre-MDC MS-DRG 018 in prior rulemaking,
most recently in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69008
through 69010), and we continue to be interested in obtaining input
from members of the public on options to consider, recognizing there
are additional types of cell and gene therapies now mapping to Pre-MDC
MS-DRG 018. We will continue to review additional feedback and
suggestions in connection with future rulemaking.
In response to the requestor's assertion that there is no
opportunity for interested parties to submit feedback about MS-DRG
assignments, as we have discussed in prior rulemaking (87 FR 48807
through 48808) and as noted in the request, interested parties may use
current coding information as shown in the ICD-10 C&M Committee meeting
materials to consider the potential MS-DRG assignments for any
procedure codes that may be finalized after the Spring meeting and
submit public comments for consideration. As we have noted in prior
rulemaking, because the diagnosis and procedure code proposals that are
presented at the Spring ICD-10-CM C&M Committee meeting for an October
1 implementation (upcoming FY) are not finalized in time to include in
Table 6A.--New Diagnosis Codes and Table 6B.--New Procedure Codes in
association with the proposed rule, we use our established process to
examine the MS-DRG assignment for the predecessor codes to determine
the most appropriate MS-DRG assignment. Specifically, we review the
predecessor code and MS-DRG assignment most closely associated with the
new procedure code, and in the absence of claims data, we consider
other factors that may be relevant to the MS-DRG assignment, including
the severity of illness, treatment difficulty, complexity of service
and the resources utilized in the diagnosis and/or treatment of the
condition. We have noted in prior rulemaking that this process does not
automatically result in the new procedure code being assigned to the
same MS-DRG or to have the same designation (O.R. versus Non-O.R.) as
the predecessor code. In response to the question regarding the
inclusion of information on mapping requests as part of the ICD-10 C&M
Committee meeting materials, we note that, as announced at each ICD-10
C&M Committee meeting, there is no discussion of MS-DRGs, payment,
coverage, or billing at the ICD-10 C&M Committee meetings; therefore,
we do not include such information in the meeting materials made
publicly available in association with the meeting. Rather, we state
that any issues related to MS-DRGs or payment are addressed through
IPPS rulemaking. The purpose of the ICD-10 C&M Committee meeting is to
present code proposals based on requests received regarding coding
updates (that is, additions, deletions, or revisions). Therefore, while
mapping requests may be included in the submission of an ICD-10-PCS
procedure code request, that information is not included in the meeting
materials, nor is there any discussion about any mapping request(s)
during the meeting.
In response to the requestor's question regarding whether comments
submitted to the ICD-10 C&M Committee about potential mappings are
shared with the CMS staff associated with MS-DRG mapping decisions, we
note that the comments are shared. With respect to whether interested
parties should include the same comments submitted to the ICD-10 C&M
Committee in the comments submitted in response to the proposed rule,
we note that what comments to include and submit for each process is up
to the commenter. In response to the question of whether comments
submitted in response to the proposed rule would be considered within
scope for proposed codes presented during the Spring meeting that are
subsequently finalized but not listed in Table 6A.--New Diagnosis codes
and Table 6B.--New Procedure Codes with proposed mappings, we note that
the procedure code update files reflecting the newly finalized codes
are made publicly available following the receipt and review of public
comments received by the established deadline for the Spring coding
topics, and that interested parties may choose to submit public
comments on MS-DRG assignment for the agency's consideration. Lastly,
in response to the question of whether interested parties considering
submitting comments on procedure code mappings should request code
proposals associated with the Spring meeting be delayed until the Fall
meeting, we similarly note that the decision on what comments a
commenter decides to include and submit in response to a code proposal
is up to the commenter. We refer the reader to section II.C.11. of the
preamble of this FY 2026 IPPS/LTCH PPS proposed rule for additional
information regarding the ICD-10 C&M Committee meeting process.
In connection with the comments and questions about how products
are grouped under the IPPS MS-DRGs, specifically with respect to cell
and gene therapies under Pre-MDC MS-DRG 018, for FY 2026, we also
received a request to create a new neurosurgical gene therapy MS-DRG to
more accurately reflect the clinical characteristics and resource
intensity required for the administration of neurosurgical gene
therapies, including eladocagene exuparvovec, for patients diagnosed
with Aromatic L-amino acid decarboxylase (AADC) deficiency. We refer
the reader to the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895) and
the FY 2023 IPPS/LTCH PPS final rule (87 FR 48853 through 48854) for
discussion regarding eladocagene exuparvovec.
The requestor (the manufacturer), expressed its appreciation for
CMS' efforts to reassign cases reporting procedure code XW0Q316
(Introduction of eladocagene exuparvovec into cranial cavity and brain,
percutaneous approach, new technology group 6) to a surgical MS-DRG as
discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895).
According to the requestor, the decision appropriately reclassified
cases involving eladocagene exuparvovec from a Non-O.R. procedure to an
operating room (O.R.) procedure due to
[[Page 18017]]
the requirement for intraputaminal administration via a burr hole in
the skull. However, the requestor did not agree with the current
assignment to MS-DRGs 628, 629, and 630 (Other Endocrine, Nutritional
and Metabolic O.R. Procedures with MCC, with CC, and without CC/MCC,
respectively) in MDC 10, or MS-DRGs 987, 988, and 989 (Non-Extensive
O.R. Procedure Unrelated to Principal Diagnosis with MCC, with CC, and
without MCC/CC, respectively). According to the requestor, the clinical
characteristics and average costs of the cases currently assigned to
MS-DRGs 628, 629, and 630 are significantly different from those
associated with eladocagene exuparvovec neurosurgical gene therapy for
rare disease.
The requestor stated that CMS denied the request to create a new
MS-DRG for FY 2023, stating that it would continue to explore
appropriate mechanisms to address low volume MS-DRGs indicated for rare
diseases; however, after receiving responses to the Request for
Information (RFI), the requestor stated that there have not been any
changes proposed to the IPPS. The requestor stated its belief that
assigning cases for this gene therapy and the rare disease indicated to
a new MS-DRG is both appropriate and warranted. According to the
requestor, the current MS-DRGs that eladocagene exuparvovec cases group
to do not adequately reflect the clinical characteristics or resource
needs associated with treatment which may deter hospitals from
providing this therapy.
The requestor also stated there are approximately 68 gene therapy
trials in the U.S. for central nervous system disorders for which over
30 of the 68 trials involve the gene therapy being administered
directly into the brain parenchyma. According to the requestor, gene
therapies administered surgically, including with neurosurgery, are
extremely complicated, resource-intensive procedures for hospitals to
undertake. These procedures require highly specialized surgeons,
surgical equipment, and staff. Patients undergoing these procedures may
also require continuous monitoring and longer hospital stays. The
requestor stated the more intensive needs of these patients are not
adequately captured in existing MS-DRGs and the creation of a new MS-
DRG for neurosurgical gene therapy would help CMS proactively shape
payment policy for this evolving class of therapies, thus allowing
appropriate payment to support patient access to these treatments.
Our analysis of the September 2024 update of the FY 2024 MedPAR
file yielded zero cases reporting the administration of eladocagene
exuparvovec, therefore, we believe it would be premature to consider
the creation of a new neurosurgical gene therapy MS-DRG at this time.
We appreciate the detailed clinical information that the requestor
provided and acknowledge that cases involving neurosurgery are
technically complex and that patients undergoing these procedures tend
to be critically ill, many with rare diseases.
We note that we did receive a new procedure code request to
identify and describe the Smartflow[supreg] Neuro Cannula as the
delivery mechanism to administer eladocagene exuparvovec that was
included as a topic in the Spring 2025 ICD-10 Coordination and
Maintenance Committee Update materials. We refer the reader to the CMS
website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials for additional detailed information regarding the request,
and the related materials.
We continue to welcome additional feedback and comments on other
options to consider on how to appropriately address low volume, high-
cost treatments for rare diseases.
We also note, as discussed in prior rulemaking, that this category
of therapies continues to evolve, and we are in the process of
carefully considering the feedback we have previously received about
ways in which we can continue to appropriately reflect resource
utilization while maintaining clinical coherence and stability in the
relative weights under the IPPS MS-DRGs. We appreciate the
recommendations and suggestions for consideration we have received and
will continue to examine these complex issues in connection with future
rulemaking. We acknowledge that there may be distinctions to account
for as we continue to gain more experience in the use of these
therapies and have additional claims data to analyze.
3. MDC 01 (Diseases and Disorders of the Nervous System)
a. Logic for MS-DRGs 023 Through 027
For this FY 2026 IPPS/LTCH PPS proposed rule, we received three
separate but related requests to review the MS-DRG assignments for a
subset of procedures assigned to MS-DRGs 023 through 027. In this
section of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule, we
discuss each of these separate, but related requests.
The first request was to create a new MS-DRG for cases involving
``chemotherapy implants'' and cases involving ``epilepsy with
neurostimulator.'' The requestor noted chemotherapy implants are used
to treat patients with brain tumors. They are implanted into the brain
during the craniotomy procedure at the time of tumor resection. Upon
implantation, these devices immediately release radiation or
chemotherapeutic agents. This approach enables treatment to be
initiated at the time of tumor resection without undue delay.
``Epilepsy with neurostimulator'' cases involve devices used in the
treatment of medically intractable epilepsy. The neurostimulator is
implanted in the skull via a craniotomy and is connected to electrodes
that are implanted on the surface of the brain or in the brain through
either a craniotomy or a burr hole(s). According to the requestor, like
the procedure to insert a chemotherapy implant, the craniotomy
procedure to insert the neurostimulator lead is performed under general
anesthesia and the procedure typically takes four hours.
The requestor performed their own analysis of Medicare claims data
and stated they found that the average costs of cases involving
chemotherapy implants and cases involving epilepsy with
neurostimulators are significantly higher than the average costs of
other procedures currently grouped within MS-DRG 023. The requestor
asserted that as a result, these cases are not being adequately paid
under the current MS-DRG. Therefore, given the limited options within
the existing MS-DRG structure, the requestor recommended that CMS
extract cases reporting the insertion of a chemotherapy implant and
cases reporting a neurostimulator generator inserted into the skull
with the insertion of a neurostimulator lead into the brain, and a
principal diagnosis of epilepsy from MS-DRG 023 and create a new MS-DRG
for these cases with a payment rate that better aligns with the
resource utilization associated with these procedures. The requestor
stated that this recommendation appeared to be reasonable, given that
CMS has already determined that these two subsets of cases are
clinically coherent by virtue of them being currently assigned to the
same MS-DRG.
To begin our analysis, we reviewed the GROUPER logic for MS-DRGs
023 and 024. The requestor is correct that currently, cases involving
``chemotherapy implants'' and cases involving ``epilepsy with
neurostimulator'' are assigned to the higher severity level MS-DRG 023.
MS-
[[Page 18018]]
DRGs 023 and 024 contain a logic list referred to as ``Chemotherapy
Implant.'' This logic list includes the following four ICD-10-PCS
codes:
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
00H004Z................ Insertion of radioactive element, cesium-131
collagen implant into brain, open approach.
3E0Q005................ Introduction of other antineoplastic into
cranial cavity and brain, open approach.
3E0Q305................ Introduction of other antineoplastic into
cranial cavity and brain, percutaneous
approach.
3E0Q705................ Introduction of other antineoplastic into
cranial cavity and brain, via natural or
artificial opening.
------------------------------------------------------------------------
The ``Chemotherapy Implant'' logic list was created for cases
reporting the implantation of a chemotherapeutic agent and devices
implanted in the brain, such as implantable chemotherapeutic wafers.
Additionally, MS-DRGs 023 and 024 contain a logic list referred to as
``Epilepsy Principal Diagnosis'' that includes 58 ICD-10-CM diagnosis
codes that describe epilepsy, and a logic list referred to as
``Neurostimulator'' that includes the following three ICD-10-PCS
procedure code combinations:
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H00MZ (Insertion of
neurostimulator lead into brain, open approach);
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H03MZ (Insertion of
neurostimulator lead into brain, percutaneous approach); and
0NH00NZ (Insertion of neurostimulator generator into
skull, open approach), in combination with 00H04MZ (Insertion of
neurostimulator lead into brain, percutaneous endoscopic approach).
These two logic lists were created to capture cases involving the
use of the RNS[supreg] neurostimulator, a treatment option for persons
diagnosed with medically intractable epilepsy. The RNS[supreg]
neurostimulator includes a cranially implanted programmable
neurostimulator connected to one or two depth and/or subdural cortical
strip leads that are surgically placed in or on the brain at the
seizure focus. The implanted neurostimulator continuously monitors
brain electrical activity and is programmed by a physician to detect
abnormal patterns of electrical activity that the physician believes
may lead to seizures (epileptiform activity).
We refer the reader to the ICD-10 MS-DRG Definitions Manual,
Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the
GROUPER logic for MS-DRGs 023 and 024.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRG 023 and compared the
results to cases reporting one of the four procedure codes that appear
under the logic list referred to as ``Chemotherapy Implant'' in MS-DRG
023 and for all cases reporting a neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain (including cases involving the use of the RNS[supreg]
neurostimulator), and a principal diagnosis of epilepsy. The following
table shows our findings:
MS-DRG 023--All Cases Compared to Cases Reporting the Insertion of a
Chemotherapy Implant and Cases Reporting a Neurostimulator Generator
Inserted Into the Skull With the Insertion of a Neurostimulator Lead
Into the Brain and a Principal Diagnosis of Epilepsy
------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
------------------------------------------------------------------------
MS-DRG 023--All cases................. 12,136 10 $51,132
Cases reporting the insertion of a 176 6.4 49,743
chemotherapy implant.................
Cases with principal diagnosis of 68 2.4 66,303
epilepsy with neurostimulator
generator inserted into the skull and
insertion of a neurostimulator lead
into brain...........................
------------------------------------------------------------------------
As shown in the table, for MS-DRG 023, we identified a total of
12,136 cases, with an average length of stay of 10 days and average
costs of $51,132. Of the 12,136 cases in MS-DRG 023, there were 176
cases reporting the insertion of a chemotherapy implant with an average
length of stay of 6.4 days and average costs of $49,743. Additionally,
there were 68 cases describing a neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain (including cases involving the use of the RNS[supreg]
neurostimulator) that had a principal diagnosis of epilepsy with an
average length of stay of 2.4 days and average costs of $66,303.
As the data show, the 68 cases in MS-DRG 023 describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy have average costs that are higher than the average costs of
all cases in MS-DRG 023 ($66,303 compared to $51,132), and they have an
average length of stay that is shorter (2.4 days compared to 10 days).
The 176 cases in MS-DRG 023 reporting the insertion of a chemotherapy
implant have average costs that are lower than the average costs of all
cases in MS-DRG 023 ($49,743 compared to $51,132), and they have an
average length of stay that is shorter (6.4 days compared to 10 days).
We reviewed the claims data, and do not believe the data support
creating a new MS-DRG for cases reporting the insertion of a
chemotherapy implant and cases describing a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the RNS[supreg]
neurostimulator) and a principal diagnosis of epilepsy. The results of
the claims analysis as
[[Page 18019]]
previously summarized indicate the cases reporting the insertion of a
chemotherapy implant demonstrate comparable resource utilization with
other cases in their currently assigned MS-DRG. Further, the claims
data analysis indicates that these two subsets of cases, that is cases
reporting the insertion of a chemotherapy implant and cases describing
a neurostimulator generator inserted into the skull with the insertion
of a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy and cases reporting the insertion of a chemotherapy implant,
do not demonstrate comparable resource utilization. The cases in MS-DRG
023 reporting the insertion of a chemotherapy implant have average
costs that are lower than the average costs of cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain and a principal diagnosis of
epilepsy ($49,743 compared to $66,303), and they have an average length
of stay that is longer (6.4 days compared to 2.4 days).
Therefore, based on review of the claims data, we are not proposing
to create a new-MS-DRG for cases reporting the insertion of a
chemotherapy implant and cases describing a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the RNS[supreg]
neurostimulator) and a principal diagnosis of epilepsy for FY 2026.
However, while our analysis of the claims data does not support
creating a new MS-DRG for cases reporting the insertion of a
chemotherapy implant and cases describing a neurostimulator generator
inserted into the skull with the insertion of a neurostimulator lead
into the brain (including cases involving the use of the RNS[supreg]
neurostimulator) and a principal diagnosis of epilepsy, as discussed,
cases describing a neurostimulator generator inserted into the skull
with the insertion of a neurostimulator lead into the brain (including
cases involving the use of the RNS[supreg] neurostimulator) and a
principal diagnosis of epilepsy have average costs that are higher than
the average costs of all cases in MS-DRG 023, with a shorter average
length of stay. Accordingly, we determined that further analysis of
cases reporting a neurostimulator generator inserted into the skull
with the insertion of a neurostimulator lead into the brain (including
cases involving the use of the RNS[supreg] neurostimulator), and a
principal diagnosis of epilepsy is needed in conjunction with the
separate but related requests we received to review the MS-DRG
assignments for a subset of procedures also assigned to MS-DRGs 023
through 027 for this FY 2026 IPPS/LTCH PPS proposed rule to ensure
clinical coherence between these cases and the other cases with which
they may potentially be grouped, as discussed later in this section.
As noted previously, MS-DRGs 023 and 024 contain a logic list
referred to as ``Chemotherapy Implant'' that includes the following
four ICD-10-PCS codes:
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
00H004Z................ Insertion of radioactive element, cesium-131
collagen implant into brain, open approach.
3E0Q005................ Introduction of other antineoplastic into
cranial cavity and brain, open approach.
3E0Q305................ Introduction of other antineoplastic into
cranial cavity and brain, percutaneous
approach.
3E0Q705................ Introduction of other antineoplastic into
cranial cavity and brain, via natural or
artificial opening.
------------------------------------------------------------------------
During our review of the GROUPER logic for MS-DRGs 023 and 024, we
identified that the following four ICD-10-PCS procedure codes
describing the insertion of a radioactive element were inadvertently
excluded from the ``Chemotherapy Implant'' logic list:
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
00H001Z................ Insertion of radioactive element into brain,
open approach.
00H005Z................ Insertion of radioactive element, palladium-103
collagen implant into brain, open approach.
00H031Z................ Insertion of radioactive element into brain,
percutaneous approach.
00H041Z................ Insertion of radioactive element into brain,
percutaneous endoscopic approach.
------------------------------------------------------------------------
In review of this finding, we analyzed claims data from the
September 2024 update of the FY 2024 MedPAR file for MS-DRGs 023, 024,
025, 026, and 027 for all cases and for cases reporting procedure codes
00H001Z, 00H005Z, 00H031Z, or 00H041Z. The findings from our analysis
are shown in the following table.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
----------------------------------------------------------------------------------------------------------------
023............................... All cases............................ 12,136 10 $51,132
Cases reporting 00H001Z, 00H005Z, 0 0 0
00H031Z, or 00H041Z.
024............................... All cases............................ 4,624 5 35,516
Cases reporting 00H001Z, 00H005Z, 0 ........... 0
00H031Z, or 00H041Z.
025............................... All cases............................ 21,059 8.6 40,215
Cases reporting 00H001Z, 00H005Z, 4 3.8 40,199
00H031Z, or 00H041Z.
026............................... All cases............................ 5,833 4.1 28,404
Cases reporting 00H001Z, 00H005Z, 0 0 0
00H031Z, or 00H041Z.
027............................... All cases............................ 7,049 1.9 23,059
Cases reporting 00H001Z, 00H005Z, 0 0 0
00H031Z, or 00H041Z.
----------------------------------------------------------------------------------------------------------------
[[Page 18020]]
As the data show, we found four cases reporting procedure code
00H001Z, 00H005Z, 00H031Z, or 00H041Z in MS-DRG 025, with average costs
of $40,199 and an average length of stay of 3.8 days. We reviewed this
issue and note radioactive elements are inserted into the brain to
deliver a targeted concentrated dose of radiation directly to a brain
tumor or tumor bed. They are primarily used to treat recurrent brain
metastases or other aggressive brain cancers, as it allows for high-
dose radiation delivery specifically to the tumor site while minimizing
damage to surrounding healthy brain tissue. Although we did not
identify many cases, we believe the four procedure codes describing the
insertion of a radioactive element into the brain are clinically
aligned with the procedure codes currently included in the
``Chemotherapy Implant'' logic list in MS-DRGs 023 and 024.
Therefore, for clinical consistency we are proposing to add
procedure codes 00H001Z, 00H005Z, 00H031Z, and 00H041Z to the
``Chemotherapy Implant'' logic list in MS-DRGs 023 and 024, effective
October 1, 2025, for FY 2026. We are also proposing to change the
description of the logic list in MS-DRGs 023 and 024 from
``Chemotherapy Implant'' to ``Antineoplastic Implant'' to better
reflect the GROUPER logic that includes ICD-10-PCS procedure codes
describing antineoplastic agents implanted in the brain.
As mentioned previously, for this FY 2026 IPPS/LTCH PPS proposed
rule, we received three separate but related requests to review and
reconsider the MS-DRG assignments for a subset of procedures assigned
to MS-DRGs 023 through 027. The second and third request involve the
MS-DRG assignment of cases reporting procedure codes describing the
insertion of deep brain stimulators (DBS). Deep brain stimulation is a
surgical treatment that involves the implantation of a neurostimulator,
used in the treatment of essential tremor, Parkinson's disease,
dystonia, epilepsy, obsessive-compulsive disorder and chronic pain. A
DBS system consists of one or two leads that are placed
stereotactically at defined targets deep within the brain via one or
two burr holes created in the skull. The lead is then connected to an
extension that is tunneled under the skin, down the neck, and connected
to a programmable neurostimulator generator that is placed under the
skin.
The second request we received was to reassign cases reporting the
implantation of a DBS system from the lower (without MCC) severity
level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023, even if
there is no MCC reported. The requestor suggested that if finalized,
the title for MS-DRG 023 should be revised to reflect ``Craniotomy with
Acute Complex Central Nervous System Principal Diagnosis with MCC or
Chemotherapy Implant or Major Device Implant or Epilepsy with
Neurostimulator.''
The requestor performed their own analysis and stated they found
that the majority of cases reporting the implantation of a DBS system
are assigned to the lower severity level MS-DRG 024. The requestor also
stated that in their analysis, the cases reporting the implantation of
a DBS system assigned to MS-DRG 024 have average costs that are 20%
greater than all cases in MS-DRG 024. The requestor asserted that
reassigning cases reporting the implantation of a DBS system from the
lower (without MCC) severity level MS-DRG 024 to the higher (with MCC)
severity level MS-DRG 023, even if there is no MCC reported, would
better recognize hospital resource utilization when the DBS systems are
inserted.
The requestor identified cases reporting the implantation of a DBS
system by the presence of the following procedure code combinations:
0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H00MZ (Insertion of neurostimulator lead into brain,
open approach);
0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H03MZ (Insertion of neurostimulator lead into brain,
percutaneous approach);
0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H00MZ (Insertion of neurostimulator
lead into brain, open approach); and
0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H03MZ (Insertion of neurostimulator
lead into brain, percutaneous approach).
To begin our analysis, we again reviewed the GROUPER logic for MS-
DRGs 023 and 024. The GROUPER logic for MS-DRGs 023 and 024 also
contains 78 procedure code combinations representing the insertion of
neurostimulator generator and a neurostimulator lead that are captured
under a list referred to as ``Major Device Implant.'' The procedure
codes describing the insertion of a neurostimulator generator on this
list describe insertion of the neurostimulator generator into the
subcutaneous areas of the chest, back, or abdomen, as well as into the
skull. The procedure codes describing the insertion of a
neurostimulator lead describe the insertion of the lead into the brain
or the cerebral ventricle. We refer the reader to the ICD-10 MS-DRG
Definitions Manual, Version 42.1 (available on the CMS website at:
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete
documentation of the GROUPER logic for MS-DRGs 023 and 024.
In our analysis of this issue, we agree that the four procedure
code combinations discussed previously that were identified by this
requestor are included in the ``Major Device Implant'' logic list of
MS-DRGs 023 and 024, but we note that 32 additional procedure code
combinations exist on the ``Major Device Implant'' logic list that also
describe the implantation of a DBS system by describing the insertion
of a neurostimulator generator into the subcutaneous areas of the
chest, back, or abdomen in combination with a code describing the
insertion of a neurostimulator lead into the brain. We refer the reader
to Table 6P.2a associated with this FY 2026 IPPS/LTCH PPS proposed rule
(and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the list of the 36 ICD-10-PCS
procedure code combinations in the logic of MS-DRGs 023 and 024 in the
``Major Device Implant'' logic list that we identified that describe
the implantation of a DBS system and therefore were included in our
analysis.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRGs 023 and 024 and compared
the results to cases reporting the implantation of a DBS system by
reporting a procedure code combination that describes the insertion of
a neurostimulator generator into the subcutaneous areas of the chest,
back, or abdomen in combination with a code describing the insertion of
a neurostimulator lead into the brain. The following table shows our
findings:
[[Page 18021]]
MS-DRGs 023 and 024--All Cases Compared to Cases Reporting the Insertion of a Deep Brain Stimulation System
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases........................................... 12,136 10 $51,132
Cases reporting the implantation of a DBS system................ 26 8.3 81,947
MS-DRG 024--All cases........................................... 4,624 5 35,516
Cases reporting the implantation of a DBS system................ 432 1.7 43,032
----------------------------------------------------------------------------------------------------------------
As shown in the table, for MS-DRG 023, we identified a total of
12,136 cases, with an average length of stay of 10 days and average
costs of $51,132. Of the 12,136 cases in MS-DRG 023, there were 26
cases reporting the implantation of a DBS system with an average length
of stay of 8.3 days and average costs of $81,947. For MS-DRG 024, we
identified a total of 4,624 cases, with an average length of stay of 5
days and average costs of $35,516. Of the 4,624 cases in MS-DRG 024,
there were 432 cases reporting the implantation of a DBS system with an
average length of stay of 1.7 days and average costs of $43,032.
We reviewed the claims data, and the data do not support
reassignment of the cases reporting the implantation of a DBS system
from MS-DRG 024 to MS-DRG 023 even if there is no MCC reported. The
results of the claims analysis as previously summarized indicate the
cases reporting the implantation of a DBS system, without reporting a
secondary diagnosis designated as an MCC, that are currently assigned
to MS-DRG 024, have average costs that are lower than the average costs
of all cases in MS-DRG 023 ($43,032 compared to $51,132), and they have
an average length of stay that is shorter (1.7 days compared to 10
days). While the average costs of these cases are higher than the
average costs of all cases in MS-DRG 024 ($43,032 compared to $35,516),
we believe it would not be appropriate to reassign these cases into the
higher severity level MS-DRG 023, even if there is no MCC reported,
because the cases would not be coherent with regard to resource
utilization. The cases reporting the implantation of a DBS system,
without reporting a secondary diagnosis designated as an MCC, that are
currently assigned to MS-DRG 024 have average costs that are $8,100
lower than the average costs of all cases in MS-DRG 023. Therefore, we
are not proposing to reassign cases reporting the implantation of a DBS
system from the lower (without MCC) severity level MS-DRG 024 to the
higher (with MCC) severity level MS-DRG 023, even if there is no MCC
reported. However, while the analysis of the claims data does not
support reassigning the cases reporting the implantation of a DBS
system from the lower (without MCC) severity level MS-DRG 024 to the
higher (MCC) severity level MS-DRG 023 even if there is no MCC
reported, as discussed, our analysis of the claims data found the
average costs of the cases reporting the implantation of a DBS system
are higher than all cases in their respective MS-DRGs, while the
average lengths of stay are shorter. Accordingly, and as discussed
later in this section, we determined that further analysis of cases
reporting the implantation of a DBS system is needed in conjunction
with the separate but related requests we received to review the MS-DRG
assignments for a subset of procedures also assigned to MS-DRGs 023
through 027 for this FY 2026 IPPS/LTCH PPS proposed rule to ensure
clinical coherence between these cases and the other cases with which
they may potentially be grouped.
The third request we received was to have all cases reporting the
concomitant insertion of a DBS generator and lead assigned to MS-DRGs
023 and 024. This requestor performed their own analysis and stated
they found 76 claims reporting procedure codes describing the insertion
of a DBS generator and a lead assigned to MS-DRGs 026 and 027
(Craniotomy and Endovascular Intracranial Procedures with CC, and
without CC/MCC, respectively) and found that the average costs of these
cases were 54% and 63% higher than the average of all cases in MS-DRGs
026 and 027, respectively. The requestor stated that placement of a
complete DBS system, which requires placement of both the generator and
the lead, during a single procedure, appears to be an efficacious and
well-tolerated procedure. The requestor asserted that the relatively
low reimbursement in MS-DRGs 026 and 027 can limit patient access to a
single stage procedure.
This requestor identified cases reporting the implantation of a DBS
system by the presence of the following procedure code combinations:
0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H00MZ (Insertion of neurostimulator lead into brain,
open approach);
0JH60DZ (Insertion of multiple array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H03MZ (Insertion of neurostimulator lead into brain,
percutaneous approach);
0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H00MZ (Insertion of neurostimulator
lead into brain, open approach); and
0JH60EZ (Insertion of multiple array rechargeable
stimulator generator into chest subcutaneous tissue and fascia, open
approach), in combination with 00H03MZ (Insertion of neurostimulator
lead into brain, percutaneous approach);
0JH60BZ (Insertion of single array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H00MZ (Insertion of neurostimulator lead into brain,
open approach); and
0JH60BZ (Insertion of single array stimulator generator
into chest subcutaneous tissue and fascia, open approach), in
combination with 00H03MZ (Insertion of neurostimulator lead into brain,
percutaneous approach).
To begin our analysis, we again reviewed the GROUPER logic for MS-
DRG 023 and 024. As mentioned previously, the GROUPER logic for MS-DRGs
023 and 024 contains 78 procedure code combinations representing the
insertion of neurostimulator generator and a neurostimulator lead that
are captured under a list referred to as ``Major Device Implant.'' The
procedure codes describing the insertion of a neurostimulator generator
on this list describe insertion of the neurostimulator generator into
the subcutaneous areas of the chest, back, or abdomen, as well as into
the skull.
[[Page 18022]]
In reviewing this request, we noted that the procedure code
combinations in MS-DRG 023 and 024 captured under the ``Major Device
Implant'' logic list that describe the insertion of a neurostimulator
generator into the subcutaneous areas of the chest, back, or abdomen,
all describe the insertion of a multiple array stimulator generator or
a rechargeable multiple array stimulator generator. Procedure code
combinations describing the insertion of a single array stimulator
generator or a rechargeable single array stimulator generator into the
subcutaneous areas of the chest, back, or abdomen and a neurostimulator
lead are not captured under the ``Major Device Implant'' logic list,
therefore MS-DRGs 025, 026, and 027 (Craniotomy and Endovascular
Intracranial Procedures with MCC, with CC, and without CC/MCC,
respectively) are assigned based on the reporting of the ICD-10-PCS
procedure code describing the insertion of the neurostimulator into the
brain. We refer the reader to the ICD-10 MS-DRG Definitions Manual,
Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the
GROUPER logic for MS-DRGs 023, 024, 025, 026, and 027.
We identified 36 ICD-10-PCS procedure code combinations that would
describe the implantation of a DBS system with a single array
stimulator generator or a rechargeable single array stimulator
generator and the insertion of a neurostimulator lead into the brain.
We refer the reader to Table 6P.2b associated with this FY 2026 IPPS/
LTCH PPS proposed rule (and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the list
of the 36 ICD-10-PCS procedure code combinations we identified that
describe the implantation of a DBS system with a single array
stimulator generator or a rechargeable single array stimulator
generator and the insertion of a neurostimulator lead into the brain.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRGs 025, 026, and 027 and
compared the results to cases reporting a procedure code combination
that describes the insertion of a single array stimulator generator or
a rechargeable single array stimulator generator into the subcutaneous
areas of the chest, back, or abdomen in combination with a code
describing the insertion of a neurostimulator lead into the brain. The
following table shows our findings:
MS-DRGs 025, 026, and 027--All Cases Compared to Cases Reporting the Insertion of a Single Array Generator and
Insertion of Neurostimulator Lead Into Brain
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 025--All cases........................................... 21,059 8.6 $40,215
Cases reporting the insertion of a single array generator and 5 5 73,168
insertion of neurostimulator lead into brain...................
MS-DRG 026--All cases........................................... 5,833 4.1 28,404
Cases reporting the insertion of a single array generator and 25 2.3 42,002
insertion of neurostimulator lead into brain...................
MS-DRG 027--All cases........................................... 7,049 1.9 23,059
Cases reporting the insertion of a single array generator and 78 1.4 39,381
insertion of neurostimulator lead into brain...................
----------------------------------------------------------------------------------------------------------------
As shown in the table, for MS-DRG 025, we identified a total of
21,059 cases, with an average length of stay of 8.6 days and average
costs of $40,215. Of those 21,059 cases, there were 5 cases reporting
the insertion of a single array generator and insertion of
neurostimulator lead into brain with average costs higher than the
average costs in the FY 2024 MedPAR file for MS-DRG 025 ($73,168
compared to $40,215) and a shorter average length of stay (5 days
compared to 8.6 days). In MS-DRG 026, we identified a total of 5,833
cases, with an average length of stay of 4.1 days and average costs of
$28,404. Of the 5,833 cases in MS-DRG 026, there were 25 cases
reporting the insertion of a single array generator and insertion of
neurostimulator lead into brain with average costs higher than the
average costs in the FY 2024 MedPAR file for MS-DRG 026 ($42,002
compared to $28,404) and a shorter average length of stay (2.3 days
compared to 4.1 days). In MS-DRG 027, we identified a total of 7,049
cases, with an average length of stay of 1.9 days and average costs of
$23,059. Of the 7,049 cases in MS-DRG 027, there were 78 cases
reporting the insertion of a single array generator and insertion of
neurostimulator lead into brain with average costs higher than the
average costs in the FY 2024 MedPAR file for MS-DRG 027 ($39,381
compared to $23,059) and a shorter average length of stay (1.4 days
compared to 1.9 days). As the data show, the cases in MS-DRGs 025, 026,
and 027 reporting the insertion of a single array generator and
insertion of neurostimulator lead into brain have average costs that
are higher than the average costs of all cases in their respective MS-
DRGs.
We reviewed the clinical issues and note a deep brain stimulator
typically has one or two leads implanted in the brain, depending on
whether one or both sides of the brain need treatment. A single array
stimulator generator has one port where one lead can be connected. A
multiple array stimulator generator has two or more ports where two or
more leads can be connected. We believe the procedure code combinations
that describe the insertion of a single array stimulator generator or a
rechargeable single array stimulator generator into the subcutaneous
areas of the chest, back, or abdomen in combination with a code
describing the insertion of a neurostimulator lead into the brain are
clinically coherent with the procedure code combinations in MS-DRG 023
and 024 captured under the ``Major Device Implant'' logic list that
describe the insertion of a multiple array stimulator generator or a
rechargeable multiple array stimulator generator into the subcutaneous
areas of the chest, back, or abdomen in combination with a code
describing the insertion of a neurostimulator lead into the brain.
To determine how the resources for this subset of cases compared to
cases in MS-DRGs 023 and 024 as a whole, we examined the average costs
and length of stay for cases in MS-DRGs 023 and 024. Our findings are
shown in this table.
[[Page 18023]]
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases........................................... 12,136 10 $51,132
MS-DRG 024--All cases........................................... 4,624 5 35,516
----------------------------------------------------------------------------------------------------------------
We reviewed the data and note the cases in MS-DRGs 025, 026, and
027 reporting the insertion of a single array generator and insertion
of neurostimulator lead into brain have average costs that are higher
and the average length of stay is shorter than all cases in MS-DRGs 023
and 024. We agree with the requestor that cases reporting the insertion
of a single array generator and insertion of neurostimulator lead into
brain are more resource intensive and are clinically distinct from
other cases currently assigned to MS-DRGs 025, 026, and 027. However,
we do not believe proposing to reassign all cases reporting the
procedure code combination describing a single array generator and
insertion of neurostimulator lead into brain to MS-DRGs 023 and 024,
would fully address the difference in resource utilization in these
cases.
To explore other mechanisms to address this request, we then
reexamined the separate but related requests discussed previously to
review the MS-DRG assignments for a subset of procedures assigned to
MS-DRGs 023 through 027. In examining these requests, we note that the
first request was to reassign cases involving ``chemotherapy implants''
and cases involving ``epilepsy with neurostimulator'' from MS-DRG 023
and to create a new MS-DRG for these cases. While analysis of the
claims data do not support creating a new MS-DRG for cases reporting
the insertion of a chemotherapy implant and cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy, our analysis of that request found cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulator) and a principal diagnosis of
epilepsy have average costs that are higher than the average costs of
all cases in MS-DRG 023, with a shorter average length of stay.
The second request we received was to reassign cases reporting the
implantation of a DBS system from the lower (without MCC) severity
level MS-DRG 024 to the higher (MCC) severity level MS-DRG 023 even if
there is no MCC reported. While analysis of the claims data does not
support reassigning the cases reporting the implantation of a DBS
system from the lower (without MCC) severity level MS-DRG 024 to the
higher (MCC) severity level MS-DRG 023 even if there is no MCC
reported, our analysis of that request found the average costs of the
cases reporting the implantation of a DBS system are higher than all
cases in their respective MS-DRGs, while the average lengths of stay
are shorter. Lastly, our analysis of the third request demonstrates the
cases reporting the insertion of a single array generator and insertion
of neurostimulator lead into brain have average costs that are higher
than the average costs of all cases in their respective MS-DRGs, while
the average lengths of stay are shorter.
We reviewed these issues and note intracranial neurostimulator
implants, such as deep brain stimulators and RNS[supreg]
neurostimulators, are similar in that these intracranial
neurostimulators are implanted surgically and include placement of a
neurostimulator generator and insertion of leads into specific brain
regions to deliver electrical stimulation. Additionally, based on our
data analysis, cases reporting the insertion of intracranial
neurostimulator implants are clinically coherent in that they are
similar in terms of technical complexity and hospital resource use as
reflected by the similarity in average costs and average lengths of
stay.
We explored creating a new base MS-DRG for cases reporting the
insertion of an intracranial neurostimulator implant and compared the
analysis discussed previously using the claims data from the September
2024 update of the FY 2024 MedPAR file. The following table illustrates
our findings for all 654 cases reporting procedure codes describing the
insertion of an intracranial neurostimulator implant.
Cases Reporting the Insertion of an Intracranial Neurostimulator Implant
----------------------------------------------------------------------------------------------------------------
Average
Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
Cases with principal diagnosis of epilepsy with neurostimulator 68 2.4 $66,303
generator inserted into the skull and insertion of a
neurostimulator lead into brain................................
Cases reporting the implantation of a DBS system (insertion of a 26 8.3 81,947
multiple array generator and insertion of neurostimulator lead
into brain)--with MCC..........................................
Cases reporting the insertion of a multiple array generator and 1 9 44,475
insertion of neurostimulator lead into cerebral ventricle--with
MCC............................................................
Cases reporting the insertion of a single array generator and 5 5 73,168
insertion of neurostimulator lead into brain--with MCC.........
Cases reporting the insertion of a multiple array generator and 5 2.2 81,517
insertion of neurostimulator lead into cerebral ventricle--with
CC.............................................................
Cases reporting the insertion of a single array generator and 25 2.3 42,002
insertion of neurostimulator lead into brain--with CC..........
Cases reporting the implantation of a DBS system (insertion of a 432 1.7 43,032
multiple array generator and insertion of neurostimulator lead
into brain)--without MCC.......................................
Cases reporting the insertion of a multiple array generator and 14 1.7 48,258
insertion of neurostimulator lead into cerebral ventricle--
without CC/MCC.................................................
[[Page 18024]]
Cases reporting the insertion of a single array generator and 78 1.4 39,381
insertion of neurostimulator lead into brain--without CC/MCC...
-----------------------------------------------
Total....................................................... 654 2.1 47,163
----------------------------------------------------------------------------------------------------------------
We reviewed these data and do not believe proposing a new base MS-
DRG for these cases would better reflect hospital resource use. Because
there were only 654 cases identified, the analysis demonstrates both a
three-way and a two-way split of a new base MS-DRG would fail the
criterion that there be at least 500 cases for each subgroup. The
analysis also demonstrates the cases reporting a principal diagnosis of
epilepsy with neurostimulator generator inserted into the skull and
insertion of a neurostimulator lead into brain, and cases reporting the
insertion of a single or multiple array generator with a secondary
diagnosis designated as an MCC, would continue to have average costs
that are higher when compared to all other cases reporting the
insertion of an intracranial neurostimulator implant in a new MS-DRG.
We therefore explored an alternative mechanism to address these
requests.
We note that in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38015
through 38019), the FY 2021 IPPS/LTCH PPS final rule (85 FR 58459
through 58462) and the FY 2024 IPPS/LTCH PPS final rule (88 FR 58661
through 58667), we discussed requests we received to reassign cases
describing the insertion of a neurostimulator generator into the skull
in combination with the insertion of a neurostimulator lead into the
brain from MS-DRG 023 to MS-DRG 021 (Intracranial Vascular Procedures
with Principal Diagnosis Hemorrhage with CC). While acknowledging the
cases in MS-DRG 023 describing a neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain (including cases involving the use of the RNS[supreg]
neurostimulators) and a principal diagnosis of epilepsy have average
costs that are similar to the average costs of cases in MS-DRG 021, we
have stated we did not support reassigning the cases describing a
neurostimulator generator inserted into the skull with the insertion of
a neurostimulator lead into the brain (including cases involving the
use of the RNS[supreg] neurostimulators) and a principal diagnosis of
epilepsy from MS-DRG 023 to MS-DRGs 020, 021, and 022 (Intracranial
Vascular Procedures with Principal Diagnosis Hemorrhage, with MCC, with
CC, without CC/MCC, respectively), as the cases in MS-DRGs 020, 021,
and 022 are defined by a principal diagnosis of a hemorrhage. We stated
that RNS[supreg] neurostimulators are not used to treat patients with
diagnosis of a hemorrhage and that we believe that it is inappropriate
to reassign cases representing a principal diagnosis of epilepsy to a
MS-DRG that contains cases that represent the treatment of intracranial
hemorrhage.
However, after further consideration, to explore other mechanisms
to address this request, we examined MS-DRGs 020, 021, and 022 to
reconsider the possibility of reassigning the cases reporting the
insertion of an intracranial neurostimulator implant as we have been
unable to identify another MS-DRG in MDC 01 that would be a more
appropriate MS-DRG assignment for these cases based on the indication
for and complexity of the procedures.
The GROUPER logic for MS-DRGs 020, 021, and 022 contains a list of
procedure codes describing intracranial vascular procedures that are
captured under a logic list referred to as ``Intracranial Vascular
Procedures'' and a list of diagnosis codes describing a diagnosis of a
hemorrhage that are captured under a logic list referred to as
``Hemorrhage Principal Diagnosis.'' During our review of MS-DRGs 020,
021, and 022, we identified 57 ICD-10-PCS procedure codes describing
the intracranial vascular procedures and 66 diagnosis codes describing
a diagnosis of intracranial hemorrhage that were inadvertently excluded
from these logic lists. We refer the reader to Table 6P.2c and Table
6P.2d associated with this FY 2026 IPPS/LTCH PPS proposed rule (and
available at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps) for the lists of the 57 ICD-10-PCS procedure
codes and 66 ICD-10-CM diagnosis codes that we identified.
As these 57 procedure codes describe the intracranial vascular
procedures and the 66 diagnosis codes describe a diagnosis of
intracranial hemorrhage, we believe these codes are clinically aligned
with the codes currently included in the ``Intracranial Vascular
Procedures'' and the ``Hemorrhage Principal Diagnosis'' logic lists,
respectively in MS-DRGs 020, 021, and 022. Therefore, for clinical
consistency we are proposing to add the 57 procedure codes
``Intracranial Vascular Procedures'' logic list, and the 66 diagnosis
codes to the ``Hemorrhage Principal Diagnosis'' logic list of MS-DRGs
020, 021, and 022, effective October 1, 2025, for FY 2026.
In reviewing the claims data from the September 2024 update of the
FY 2024 MedPAR file and examining the clinical considerations, we
believe that the cases reporting the insertion of an intracranial
neurostimulator implant could more suitably group to MS-DRGs 020, 021,
and 022 and would lead to a grouping that is more coherent and better
reflects the clinical severity and resource use involved in these
cases. While we previously have stated that we believe it would be
inappropriate to reassign cases representing a principal diagnosis of
epilepsy to a MS-DRG that contains cases that represent the treatment
of intracranial hemorrhage, after further consideration, we no longer
believe maintaining a difference in assignment based on the indication
is warranted in this subset of cases based on the fact that both
treatments involve intracranial procedures and demonstrate comparable
resource utilization.
We also believe that cases reporting the insertion of an
intracranial neurostimulator implant, regardless of principal
diagnosis, share similar resource utilization such that it is no longer
necessary to subdivide these cases based on the diagnosis codes
reported. Accordingly, we believe it is appropriate to remove the
special logic defined as ``Epilepsy Principal Diagnosis'' from the
definition for assignment to the proposed modified MS-DRGs, as the
cases can be appropriately grouped along with cases reporting any MDC
01 diagnosis when reported with qualifying procedures, as part of the
proposed restructured MS-DRGs.
Therefore, we are proposing to add 114 procedure code combinations
to a new ``Intracranial Neurostimulator
[[Page 18025]]
Implant'' logic list in MS-DRGs 020, 021, and 022 that describe (1) the
insertion of multiple or single array neurostimulator generators with
the insertion of a neurostimulator lead into the brain or the cerebral
ventricle and (2) the insertion of neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain. We are also proposing to delete the ``Major Device Implant,''
``Epilepsy Principal Diagnosis,'' ``Neurostimulator'' logic lists from
MS-DRGs 023 and 024. We refer the reader to Table 6P.2e associated with
this FY 2026 IPPS/LTCH PPS proposed rule (and available at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps) for the list of the 114 ICD-10-PCS procedure code
combinations we propose to add to a new ``Intracranial Neurostimulator
Implant'' logic list in MS-DRGs 020, 021, and 022.
To compare and analyze the impact of these potential modifications,
we ran a simulation using the claims data from the September 2024
update of the FY 2024 MedPAR file. The following table reflects the
simulation of our proposed changes in MS-DRGs 020, 021, and 022.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
020............................. All Cases..................... 2,322 12.5 $71,9167
--add cases reporting 100 4.1 70,495
procedure codes describing
the insertion of an
intracranial neurostimulator
implant.
--add cases reporting one of 140 13.6 73,810
the 57 procedure codes
describing an intracranial
vascular procedure with one
of the 66 diagnosis codes
describing hemorrhage as
principal diagnosis.
Intracranial Vascular 2,562 12.2 71,964
Procedures with Principal
Diagnosis Hemorrhage or
Intracranial Neurostimulator
Implant with MCC.
021............................. All Cases..................... 642 7.8 48,421
--add cases reporting 134 2.2 47,421
procedure codes describing
the insertion of an
intracranial neurostimulator
implant.
--add cases reporting one of 45 9.3 54,617
the 57 procedure codes
describing an intracranial
vascular procedure with one
of the 66 diagnosis codes
describing hemorrhage as
principal diagnosis.
Intracranial Vascular 821 7 48,597
Procedures with Principal
Diagnosis Hemorrhage or
Intracranial Neurostimulator
Implant with CC.
022............................. All Cases..................... 385 2.4 28,243
--add cases reporting 420 1.5 41,525
procedure codes describing
the insertion of an
intracranial neurostimulator
implant.
--add cases reporting one of 1 1 24,744
the 57 procedure codes
describing an intracranial
vascular procedure with one
of the 66 diagnosis codes
describing hemorrhage as
principal diagnosis.
Intracranial Vascular 806 1.9 35,160
Procedures with Principal
Diagnosis Hemorrhage or
Intracranial Neurostimulator
Implant without CC/MCC.
----------------------------------------------------------------------------------------------------------------
We believe that this simulation supports that the resulting MS-DRG
assignments would be more clinically homogeneous, coherent and better
reflect hospital resource use. As the table shows, for MS-DRG 020,
there were a total of 2,322 cases with an average length of stay of
12.5 days and average costs of $71,916. For MS-DRG 021, there were a
total of 642 cases with an average length of stay of 7.8 days and
average costs of $48,421. For MS-DRG 022, there were a total of 385
cases with an average length of stay of 2.4 days and average costs of
$28,243. A review of this simulation shows that adding a new
``Intracranial Neurostimulator Implant'' logic list, while also adding
57 procedure codes to the ``Intracranial Vascular Procedures'' logic
list, and 66 diagnosis codes to the ``Hemorrhage Principal Diagnosis''
logic list in MS-DRGs 020, 021 and 022 has a limited effect on the
average costs of these MS-DRGs, while leading to a grouping that is
more coherent and better reflects the clinical severity and resource
use involved in these cases.
In summary, for FY 2026, to more appropriately reflect utilization
of resources for these procedures, we are proposing to add 114
procedure code combinations to a new ``Intracranial Neurostimulator
Implant'' logic list in MS-DRGs 020, 021, and 022 that describe (1) the
insertion of multiple or single array neurostimulator generators with
the insertion of a neurostimulator lead into the brain or the cerebral
ventricle and (2) the insertion of neurostimulator generator inserted
into the skull with the insertion of a neurostimulator lead into the
brain. We are also proposing to add 57 procedure codes to the
``Intracranial Vascular Procedures'' logic list, and 66 diagnosis codes
to the ``Hemorrhage Principal Diagnosis'' logic list of MS-DRGs 020,
021, and 022.
Additionally, we are also proposing to delete the ``Major Device
Implant,'' ``Epilepsy Principal Diagnosis,'' ``Neurostimulator'' logic
lists from MS-DRGs 023 and 024. Lastly, for consistency, we are
proposing to change the titles of MS-DRGs 020, 021, and 022 from
``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage
with MCC, with CC, and without CC/MCC, respectively'' to ``Intracranial
Vascular Procedures with Principal Diagnosis Hemorrhage or Intracranial
Neurostimulator Implant with MCC, with CC, and without CC/MCC,
respectively,'' proposing to change the title of MS-DRG 023 from
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System Principal Diagnosis with MCC or Chemotherapy Implant or Epilepsy
with Neurostimulator'' to ``Craniotomy with Acute Complex Central
Nervous System Principal Diagnosis with MCC or Antineoplastic
Implant,'' and proposing to change the title of MS-DRG 024 from
``Craniotomy with Major Device Implant or Acute Complex Central Nervous
System Principal Diagnosis without MCC'' to ``Craniotomy with Acute
Complex Central Nervous System Principal Diagnosis without MCC'' to
better reflect the assigned procedures effective October 1, 2025, for
FY 2026.
[[Page 18026]]
b. Hypertensive Encephalopathy
For this FY 2026 IPPS/LTCH PPS proposed rule, we received a request
to delete MS-DRGs 077, 078, and 079 (Hypertensive Encephalopathy with
MCC, with CC, and without CC/MCC, respectively). Hypertensive
encephalopathy refers to brain dysfunction that occurs when the brain's
blood vessels can no longer regulate blood flow due to severe or sudden
rises in blood pressure, causing brain swelling and damage. It is
characterized by the insidious onset of headache, nausea, and vomiting,
followed by non-localizing neurologic symptoms such as restlessness,
confusion, and, if the hypertension is not treated, seizures and coma.
The diagnosis is based on clinical presentation, elevated blood
pressure, and neurological examination, often supported by brain
imaging like CT or MRI. The treatment involves immediate and rapid
lowering of blood pressure with appropriate medications administered in
a controlled setting. ICD-10-CM diagnosis code I67.4 (Hypertensive
encephalopathy) is used to report this diagnosis.
The requestor noted that effective FY 2025, a ``use additional
code'' instructional note was added under diagnosis code I16.1
(Hypertensive emergency) in the ICD-10-CM Tabular List of Diseases and
Injuries. Specifically, the instructional note states, ``use additional
code, if applicable, to identify specific organ dysfunction, such as:''
and lists I67.4 as well as eight other ICD-10-CM diagnosis codes. The
requestor stated that the addition of this ``use additional code''
instructional note has sequencing implications and requires I67.4 to be
sequenced as a secondary diagnosis when hypertensive emergency and
hypertensive encephalopathy are documented. As the GROUPER logic for
MS-DRGs 077, 078, and 079 is defined by only diagnosis code I67.4, the
requestor stated there will no longer be cases grouping to medical MS-
DRGs 077, 078, and 079 because I67.4 will only be sequenced as a
secondary diagnosis and I16.1 will have to be sequenced as the
principal diagnosis. Instead, these cases will group to MDC 05
(Diseases and Disorders of the Circulatory System) medical MS-DRGs 304
and 305 (Hypertension with MCC and without MCC, respectively) since
I16.1 is assigned to those MS-DRGs.
To begin our analysis, we reviewed the ICD-10-CM Tabular List of
Diseases and Injuries. The requestor is correct a ``use additional
code'' instructional note was added under diagnosis code I16.1
(Hypertensive emergency) in the ICD-10-CM Tabular List of Diseases and
Injuries, effective FY 2025. According to the ICD-10-CM Official
Guidelines for Coding and Reporting, ``certain conditions have both an
underlying etiology and multiple body system manifestations due to the
underlying etiology. For such conditions the ICD-10-CM has a coding
convention that requires the underlying condition be sequenced first
followed by the manifestation. Wherever such a combination exists there
is a `use additional code' note at the etiology code, and a `code
first' note at the manifestation code. These instructional notes
indicate the proper sequencing order of the codes, etiology followed by
manifestation.'' We note that no such ``code first'' note appears at
ICD-10-CM diagnosis code I67.4 (Hypertensive encephalopathy) in the
ICD-10-CM Tabular List of Diseases and Injuries meaning the sequencing
depends on the circumstances of the encounter when hypertensive
emergency and hypertensive encephalopathy are documented. If providers
have cases involving hypertensive emergency and hypertensive
encephalopathy for which they need ICD-10 coding assistance, we
encourage them to submit their questions to the American Hospital
Association's Central Office on ICD-10 at https://www.codingclinicadvisor.com/.
We then reviewed the GROUPER logic. The requestor is correct that
diagnosis code I67.4 is the only diagnosis code listed under the
heading of ``Principal Diagnosis'' in the ICD-10 MS-DRG Definitions
Manual for MS-DRGs 077, 078, and 079. We refer the reader to the ICD-10
MS-DRG Definitions Manual Version 42.1, which is available on the CMS
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for
complete documentation of the GROUPER logic for MS-DRGs 077, 078, and
079. We note that a DRG for a principal diagnosis of hypertensive
encephalopathy (48 FR 39876) has existed since 1983 when Congress
amended the Social Security Act to include a national DRG-based
hospital prospective payment system for all Medicare patients.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for all cases in MS-DRGs 077, 078, and 079 to
consider the resources involved in the cases reporting a principal
diagnosis of hypertensive encephalopathy. Our findings are shown in
this table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 077--All cases........................................... 1,488 5.0 $13,176
MS-DRG 078--All cases........................................... 1,846 3.3 8,591
MS-DRG 079--All cases........................................... 243 2.4 6,729
----------------------------------------------------------------------------------------------------------------
The data reflect a moderately low volume of cases in MS-DRGs 077,
078, and 079, relatively. We then evaluated the reporting of
hypertensive encephalopathy in the inpatient setting over the past few
years in medical MS-DRGs 077, 078, and 079. We analyzed claims data for
MS-DRGs 077, 078, and 079 from the FY 2020 through the FY 2024 MedPAR
files, which were used in our analysis of claims data for MS-DRG
reclassification requests effective for FY 2022 through FY 2026 to
trend the number of cases assigned to these MS-DRGs over time. Our
findings are shown in the following graph:
[[Page 18027]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.000
The data show a general decline in the number of cases reporting
hypertensive encephalopathy as a principal diagnosis in medical MS-DRGs
077, 078, and 079 for the past 5 years. We note that as discussed in
prior rulemaking, the MS-DRGs are a classification system intended to
group together diagnoses and procedures with similar clinical
characteristics and utilization of resources. We generally seek to
identify sufficient sets of claims data with demonstrated clinical
similarity in developing diagnosis related groups rather than subsets
based on single diagnoses. After review of the findings indicating a
general decline in the number of cases reporting hypertensive
encephalopathy as a principal diagnosis, and consideration of the
intent of the MS-DRGs, we believe that there is no longer a clinical
reason to maintain the MS-DRGs for hypertensive encephalopathy (MS-DRGs
077, 078, and 079) as they are defined by the reporting of one
principal diagnosis code.
To explore mechanisms to ensure clinical coherence between cases
reporting hypertensive encephalopathy as a principal diagnosis and the
other cases with which they may potentially be grouped, we then
conducted an examination of all the MS-DRGs where I67.4 was also
reported as principal diagnosis to determine if the diagnosis was
included in any other MS-DRGs outside of MDC 01, to assess the current
MS-DRG assignment of this diagnosis code. Our findings are shown in the
following table.
Other MS-DRGs Reporting Hypertensive Encephalopathy as Principal
Diagnosis
------------------------------------------------------------------------
Average
MDC MS-DRG Description Number of length of Average
cases stay costs
------------------------------------------------------------------------
PRE.. 004 Tracheostomy with MV 1 52 $128,406
>96 Hours or
Principal Diagnosis
Except Face, Mouth
and Neck without
Major O.R.
Procedures.
01... 025 Craniotomy and 1 16 114,582
Endovascular
Intracranial
Procedures with MCC.
01... 026 Craniotomy and 1 6 79,934
Endovascular
Intracranial
Procedures with CC.
01... 028 Spinal Procedures 1 26 58,049
with MCC.
01... 037 Extracranial 4 5.5 27,923
Procedures with MCC.
01... 038 Extracranial 1 4 12,509
Procedures with CC.
01... 040 Peripheral, Cranial 5 8.2 29,325
Nerve and Other
Nervous System
Procedures with MCC.
01... 041 Peripheral, Cranial 8 4.9 14,909
Nerve and Other
Nervous System
Procedures with CC
or Peripheral
Neurostimulator.
981 Extensive O.R. 10 10.3 31,543
Procedures
Unrelated to
Principal Diagnosis
with MCC.
982 Extensive O.R. 1 1 10,926
Procedures
Unrelated to
Principal Diagnosis
with CC.
987 Non-Extensive O.R. 2 8.5 28,020
Procedures
Unrelated to
Principal Diagnosis
with MCC.
---------------------------------
Total.............. 35 9.3 32,956
------------------------------------------------------------------------
As shown in the table, we found 35 cases reporting hypertensive
encephalopathy as the principal diagnosis in MS-DRGs other than MS-DRGs
077, 078, and 079. We note that the majority of the listed MS-DRGs are
assigned to MDC 01 with one exception: PreMDC MS-DRG 004 (Tracheostomy
with MV >96 Hours or Principal Diagnosis Except Face, Mouth and Neck
without Major O.R. Procedures). Additionally, there were 11 cases that
grouped to MS-DRGs 981, and 982 (Extensive O.R. Procedure Unrelated to
Principal Diagnosis with MCC, and with CC, respectively) and two cases
that grouped to MS-DRG 987 (Non-Extensive O.R. Procedures Unrelated to
Principal Diagnosis with MCC). After review of these data, we believe
it would not be appropriate to reassign diagnosis code I67.4 to another
MDC because it could inadvertently cause cases reporting a principal
diagnosis of hypertensive encephalopathy with a nervous system
procedure to be assigned to an unrelated MS-DRG. Further, we believe it
is clinically appropriate to maintain the assignment of I67.4 in MDC 01
as the condition is consistent with other conditions reported by
diagnosis codes assigned to MDC 01.
[[Page 18028]]
We then examined the MS-DRGs within MDC 01 to consider the
possibility of reassigning the cases with a principal diagnosis of
hypertensive encephalopathy to other MS-DRGs within MDC 01. In
reviewing the claims data from the September 2024 update of the FY 2024
MedPAR file, and examining the clinical considerations, we believe that
the cases reporting a principal diagnosis of hypertensive
encephalopathy could suitably group to MS-DRGs 070, 071, and 072
(Nonspecific Cerebrovascular Disorders with MCC, with CC and, without
CC/MCC, respectively), which contain other cerebrovascular diagnoses
under the heading of ``Principal Diagnosis'' in the GROUPER logic list,
noting that hypertensive encephalopathy is considered a cerebrovascular
disorder, as it is a neurological condition directly caused by a
sudden, severe elevation in blood pressure. We refer the reader to the
ICD-10 MS-DRG Definitions Manual Version 42.1, which is available on
the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for complete documentation of the GROUPER logic for MS-DRGs
070, 071, and 072.
To determine how the resources for the cases in MS-DRGs 077, 078,
and 079 compared to cases in MS-DRGs 070, 071, and 072, we examined the
average costs and length of stay for cases in MS-DRGs 070, 071, and
072. Our findings are shown in the following table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 070--All cases........................................... 16,979 6.4 $14,771
MS-DRG 071--All cases........................................... 16,596 4.5 9,381
MS-DRG 072--All cases........................................... 2,687 2.9 7,047
----------------------------------------------------------------------------------------------------------------
As reflected, the average costs of the 1,488 cases reporting a
principal diagnosis of I67.4 with a secondary diagnosis designated as a
MCC in MS-DRG 077 are slightly lower ($13,176 compared to $14,771) and
the average length of stay is shorter (5 days compared to 6.4 days)
than for all cases in MS-DRGs 070. The average costs of the 1,846 cases
reporting a principal diagnosis of I67.4 with a secondary diagnosis
designated as a CC in MS-DRG 078 are slightly lower ($8,591 compared to
$9,381) and the average length of stay is shorter (3.3 days compared to
4.5 days) than for all cases in MS-DRGs 071. The average costs of the
243 cases reporting a principal diagnosis of I67.4 without reporting a
secondary diagnosis designated as a CC or a MCC in MS-DRG 079 are
slightly lower ($6,729 compared to $7,047) and the average length of
stay is shorter (2.4 days compared to 2.9 days) than for all cases in
MS-DRGs 072.
Our analysis demonstrates that the cases reporting a principal
diagnosis of I67.4 currently grouping to medical MS-DRGs 077, 078, and
079 are generally aligned with the average costs for the cases
currently grouping to MS-DRGs 070, 071, and 072. While the cases
reporting a principal diagnosis code describing hypertensive
encephalopathy have slightly lower costs and a shorter average length
of stay than for cases in MS-DRGs 070, 071, and 072, we believe
reassigning diagnosis code I67.4 to MS-DRGs 070, 071, and 072 will
account for the subset of patients reporting this principal diagnosis,
and will appropriately reflect the resources involved in evaluating and
treating these patients.
During our review of this issue and the examination of the MS-DRGs
within MDC 01, we noted that the title of MS-DRGs 067, 068, and 069 is
``Nonspecific CVA and Precerebral Occlusion without Infarction with
MCC, with CC, and without CC/MCC, respectively'' and the title of MS-
DRGs 070, 071, and 072 is ``Nonspecific Cerebrovascular Disorders, with
MCC, with CC, and without CC/MCC, respectively.'' In examining the
GROUPER logic for these MS-DRGs and reviewing the diagnoses listed
under the heading of ``Principal Diagnosis'' in the ICD-10 MS-DRG
Definitions Manual, we believe the titles for these MS-DRGs no longer
accurately reflects the assigned diagnoses. Like MS-DRGs 077, 078, and
079, the titles of MS-DRGs 067, 068, 069, 070, 071, and 072 were
established prior to the transition to ICD-10-CM. The terminology
``nonspecific'' in the titles for these MS-DRGs was appropriate to
describe the ICD-9-CM diagnosis codes that were previously assigned to
these DRGs, but as discussed in the HIPAA Administrative
Simplification: Modification to Medical Data Code Set Standards To
Adopt ICD-10-CM and ICD-10-PCS proposed rule (73 FR 49796 through
49803), in comparison to ICD-9-CM, ICD-10-CM diagnosis codes are very
specific and that this specificity improves the richness of data for
analysis and improves the accuracy of data used for medical research.
Therefore, we believe it is appropriate to propose to revise the titles
of these MS-DRGs for consistency.
In summary, for FY 2026, we are proposing to delete MS-DRGs 077,
078, and 079. Additionally, we are proposing to reassign ICD-10-CM
diagnosis code I67.4 (Hypertensive encephalopathy) from MDC 01 MS-DRGs
077, 078, and 079 to MS-DRGs 070, 071, and 072. Lastly, for
consistency, we are also proposing to change the titles of MS-DRGs 067,
068, and 069 from ``Nonspecific CVA and Precerebral Occlusion without
Infarction with MCC, with CC, and without CC/MCC, respectively'' to
``Precerebral Occlusion without Infarction with MCC, with CC, and
without CC/MCC, respectively'' and to change the titles of MS-DRGs 070,
071, and 072 from ``Nonspecific Cerebrovascular Disorders, with MCC,
with CC, and without CC/MCC, respectively'' to ``Other Cerebrovascular
Disorders with MCC, with CC, and without CC/MCC, respectively'' to
better reflect the assigned diagnoses.
c. Encounter for Adjustment and Management of Implanted Devices of the
Special Senses
We identified a replication issue from the ICD-9 based MS-DRGs to
the ICD-10 based MS-DRGs regarding the assignment of four ICD-10-CM
diagnosis codes that describe encounters for adjustment and management
of implanted devices of the special senses. Under the Version 32 ICD-9-
CM based MS-DRGs, ICD-9-CM diagnosis code V53.09 (Fitting and
adjustment of other devices related to nervous system and special
senses), as shown in the following table, was assigned medical MS-DRGs
091, 092, and 093 (Other Disorders of Nervous System with MCC, with CC,
and without CC/MCC, respectively) in MDC 01 (Diseases and Disorders of
the Nervous System). The four ICD-10-CM code translations also shown in
the following table, that provide more detailed and specific
information, also
[[Page 18029]]
currently group to MS-DRGs 091, 092, and 093 in the ICD-10 MS-DRGs
Version 42.1. We refer the reader to the ICD-10 MS-DRG Definitions
Manual Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete
documentation of the GROUPER logic for MS-DRGs 091, 092, and 093.
----------------------------------------------------------------------------------------------------------------
ICD-10-CM
ICD-9-CM diagnosis code Description diagnosis code Description
----------------------------------------------------------------------------------------------------------------
V53.09........................ Fitting and adjustment of other Z45.31 Encounter for adjustment and
devices related to nervous management of implanted visual
system and special senses. substitution device.
Z45.320 Encounter for adjustment and
management of bone conduction
device.
Z45.321 Encounter for adjustment and
management of cochlear device.
Z45.328 Encounter for adjustment and
management of other implanted
hearing device.
----------------------------------------------------------------------------------------------------------------
During our review of this issue, we noted that under ICD-9-CM,
diagnosis code V53.09 (Fitting and adjustment of other devices related
to nervous system and special senses) did not further describe the type
of device related to nervous system and special senses. This is in
contrast to its four comparable ICD-10-CM code translations listed in
the previous table that provide more detailed and specific information
than the ICD-9-CM diagnosis code and do specify the type of device.
In reviewing the four ICD-10-CM diagnosis codes listed in the
previous table and the devices they describe, we believe that that
Z45.31 is more appropriately assigned to MDC 02 (Diseases and Disorders
of the Eye) and codes Z45.320, Z45.321, and Z45.328 are more
appropriately assigned to MDC 03 (Diseases and Disorders of the Ear,
Nose, Mouth and Throat). We note that an ``implanted visual
substitution device,'' also known as a ``visual prosthesis,'' is a
medical implant designed to partially restore vision to a patient who
is blind by directly stimulating the visual pathway in the retina or
brain, essentially bypassing damaged photoreceptor cells in the eye and
providing a basic visual perception through electrical stimulation.
Bone conduction devices, also known as bone conduction hearing aids,
amplify sound via bone conduction, or vibrations through the bones of
the skull which directly stimulate a functioning cochlea. Cochlear
devices and other implanted hearing devices are small electronic
devices designed for patients with moderate to severe hearing loss
caused by damage to the inner ear to help perceive sounds.
We analyzed claims data from the September 2024 update of the FY
2024 MedPAR file to determine if there were any cases reported with
diagnosis codes Z45.31, Z45.320, Z45.321, or Z45.328. One case was
found in MS-DRG 983 (Extensive O.R. Procedures Unrelated to Principal
Diagnosis without CC/MCC) reporting principal diagnosis Z45.321 and
procedure code 09PE0SZ (Removal of hearing device from left inner ear,
open approach) with costs of $5,530 and a length of stay of one day.
We recognize that the volume of inpatient cases for patients with a
principal diagnosis of Z45.31, Z45.320, Z45.321, or Z45.328 is low,
however we believe that for clinical consistency, it is more
appropriate for these cases to be assigned to MDCs that better describe
the indication of the implanted devices of the special senses the codes
describe. Accordingly, because the cases reporting principal diagnoses
describing encounters for adjustment and management of implanted
devices of the special senses are more clinically consistent in MDC 02
or MDC 03 depending on the type of device, and the diagnosis codes were
initially assigned to MDC 01 MS-DRGs 091, 092, and 093 as a result of
replication in the transition from ICD-9 to ICD-10 based MS-DRGs, we
are proposing to reassign ICD-10-CM diagnosis code Z45.31 from MS-DRGs
091, 092, and 093 to MDC 02 MS-DRG 123 (Neurological Eye Disorders). We
are also proposing to reassign ICD-10-CM diagnosis codes Z45.320,
Z45.321, and Z45.328 from MS-DRGs 091, 092, and 093 to MDC 03 MS-DRGs
154, 155, and 156 (Other Ear, Nose, Mouth and Throat Diagnoses with
MCC, with CC, and without CC/MCC, respectively).
4. MDC 05 (Diseases and Disorders of the Circulatory System)
a. Endovascular Aneurysm Repair (EVAR) With Iliac Branch Procedures
We received a request to create a new MS-DRG for cases reporting
endovascular repair of abdominal aortic aneurysms that extend into at
least one iliac artery to preserve blood flow to the external or
internal iliac arteries. According to the requestor, aortic aneurysms
extend into at least one of the iliac arteries in approximately 25% of
patients with abdominal aortic aneurysms. The requestor (the
manufacturer), stated that the GORE[supreg] EXCLUDER[supreg] Iliac
Branch Endoprosthesis was approved by the Food and Drug Administration
(FDA) in March of 2016 to be used exclusively with the GORE[supreg]
EXCLUDER[supreg] Abdominal Aortic Aneurysm Endoprosthesis to isolate
the common iliac artery from systemic blood flow and preserve blood
flow in the external iliac and internal iliac arteries in patients with
a common iliac or aortoiliac aneurysm, who have appropriate anatomy.\1\
According to the requestor, maintaining flow to the internal iliac
artery and pelvic circulation using iliac branch devices or alternative
techniques aims to decrease complications associated with artery
occlusion.2 3 4 The requestor also stated that occluding the
internal iliac artery can result in significant hip and/or
[[Page 18030]]
buttock claudication, erectile dysfunction, and colonic and spinal cord
ischemia.
---------------------------------------------------------------------------
\1\ van der Veen D, Holewijn S, Bellosta R, van Sterkenburg SMM,
Heyligers JMM, Ficarelli I, G[oacute]mez Palon[eacute]s FJ,
Mangialardi N, Mosquera NJ, Holden A, Reijnen MMPJ; IceBERG Study
Collaboration. One Year Outcomes of an International Multicentre
Prospective Cohort Study on the Gore Excluder Iliac Branch
Endoprosthesis for Aorto-Iliac Aneurysms. Eur J Vasc Endovasc Surg.
2021 Aug;62(2):177-185. doi: 10.1016/j.ejvs.2021.04.006. Epub 2021
Jun 16. PMID: 34144884.
\2\ Sousa LHDG, Baptista-Silva JCC, Vasconcelos V, Flumignan
RLG, Nakano LCU. Internal iliac artery revascularisation versus
internal iliac artery occlusion for endovascular treatment of aorto-
iliac aneurysms. Cochrane Database of Systematic Reviews 2020, Issue
7. Art. No.: CD013168. DOI: 10.1002/14651858.CD013168.pub2.
\3\ Parlani G, Verzini F, De Rango P, Brambilla D, Coscarella C,
Ferrer C, Cao P. Long-term results of iliac aneurysm repair with
iliac branched endograft: a 5-year experience on 100 consecutive
cases. Eur J Vasc Endovasc Surg. 2012 Mar;43(3):287-92. doi:
10.1016/j.ejvs.2011.12.011. Epub 2012 Jan 10. PMID: 22240335.
\4\ Taudorf M, Gr[oslash]nvall J, Schroeder TV, L[ouml]nn L.
Endovascular Aneurysm Repair Treatment of Aortoiliac Aneurysms: Can
Iliac Branched Devices Prevent Gluteal Claudication? J Vasc Interv
Radiol. 2016 Feb;27(2):174-80. doi: 10.1016/j.jvir.2015.11.031. Epub
2015 Dec 22. PMID: 26706185.
---------------------------------------------------------------------------
According to the requestor, endovascular aneurysm repair (EVAR)
procedures that preserve blood flow to the iliac arteries are
technically more challenging than conventional EVAR of the abdominal
aorta, and they require increased procedure time, fluoroscopy time, and
anesthesia time. The requestor stated that tortuosity and/or stenosis
in the iliac territory may increase the complexity or even prevent the
deployment of devices, leading to treatment failure or causing early
occlusion of the branches. In such cases, some patients may develop
symptoms of pelvic ischaemia.5 6 The requestor stated that
current guidelines advocate the preservation of at least one internal
iliac artery in patients with common iliac artery aneurysms, and iliac
branched devices were developed to preserve the perfusion in the
internal iliac artery.\7\
---------------------------------------------------------------------------
\5\ Donas KP, Criado FJ, Torsello G, Veith FJ, Minion DJ;
PERICLES Registry Collaborators. Classification of Chimney EVAR-
Related Endoleaks: Insights From the PERICLES Registry. J Endovasc
Ther. 2017 Feb 1;24(1):72-74. doi: 10.1177/1526602816678994. Epub
2016 Nov 21. PMID: 27872319.
\6\ Ghosh J, Murray D, Paravastu S, Farquharson F, Walker MG,
Serracino-Inglott F. Contemporary management of aorto-iliac
aneurysms in the endovascular era. Eur J Vasc Endovasc Surg. 2009
Feb;37(2):182-8. doi: 10.1016/j.ejvs.2008.11.001. Epub 2008 Nov 29.
PMID: 19046903.
\7\ van der Veen D, Holewijn S, Bellosta R, van Sterkenburg SMM,
Heyligers JMM, Ficarelli I, G[oacute]mez Palon[eacute]s FJ,
Mangialardi N, Mosquera NJ, Holden A, Reijnen MMPJ; IceBERG Study
Collaboration. One Year Outcomes of an International Multicentre
Prospective Cohort Study on the Gore Excluder Iliac Branch
Endoprosthesis for Aorto-Iliac Aneurysms. Eur J Vasc Endovasc Surg.
2021 Aug;62(2):177-185. doi: 10.1016/j.ejvs.2021.04.006. Epub 2021
Jun 16. PMID: 34144884.
---------------------------------------------------------------------------
The requestor also expressed concern that hospitals who treat
Medicare patients with aortoiliac and common iliac aneurysms using
endovascular procedures with endoprostheses are not classified
appropriately based on the current MS-DRG assignment and the resources
required. The requestor performed its own data analysis and indicated
it found differences in resource utilization when comparing cases
reporting standard EVAR of the abdominal aorta to cases reporting EVAR
of the abdominal aorta combined with procedures to preserve flow to an
iliac branch. According to the requestor, the disparity in resource
coherency under the current MS-DRG assignment may reduce access to
Medicare beneficiaries who could benefit from these procedures. The
requestor stated a new MS-DRG would enable more precise payments and
better resource coherency under the MS-DRGs.
The procedure codes that describe EVAR using an abdominal aortic
aneurysm (AAA) endoprosthesis and the procedure codes that describe
EVAR using an iliac branch endoprosthesis (IBE) that are used to treat
aortoiliac and iliac artery aneurysms, respectively, are listed in the
following tables.
Procedure Codes Describing EVAR Using an Abdominal Aortic Aneurysm (AAA)
Endoprosthesis
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
04V03DZ................ Restriction of abdominal aorta with
intraluminal device, percutaneous approach.
04V03EZ................ Restriction of abdominal aorta with branched or
fenestrated intraluminal device, one or two
arteries, percutaneous approach.
04V03FZ................ Restriction of abdominal aorta with branched or
fenestrated intraluminal device, three or more
arteries, percutaneous approach.
------------------------------------------------------------------------
Procedure Codes Describing EVAR Using an Iliac Branch Endoprosthesis
(IBE)
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
04VC3DZ................ Restriction of right common iliac artery with
intraluminal device, percutaneous approach.
04VC3EZ................ Restriction of right common iliac artery with
branched or fenestrated intraluminal device,
one or two arteries, percutaneous approach.
04VD3DZ................ Restriction of left common iliac artery with
intraluminal device, percutaneous approach.
04VD3EZ................ Restriction of left common iliac artery with
branched or fenestrated intraluminal device,
one or two arteries, percutaneous approach.
04VE3DZ................ Restriction of right internal iliac artery with
intraluminal device, percutaneous approach.
04VF3DZ................ Restriction of left internal iliac artery with
intraluminal device, percutaneous approach.
04VH3DZ................ Restriction of right external iliac artery with
intraluminal device, percutaneous approach.
04VJ3DZ................ Restriction of left external iliac artery with
intraluminal device, percutaneous approach.
------------------------------------------------------------------------
Cases reporting a combination of these procedure codes (that is,
any one procedure code from each list) for the endovascular treatment
of aortoiliac and iliac artery aneurysms are currently assigned to MS-
DRGs 268 and 269 (Aortic and Heart Assist Procedures Except Pulsation
Balloon with MCC and without MCC, respectively). Based on its analysis
of Medicare claims data using the previously listed codes in MS-DRGs
268 and 269, and to facilitate more precise payments for these
procedures, the requestor recommended that CMS assign cases reporting a
procedure code describing EVAR using an AAA endoprosthesis with a
procedure code describing EVAR using an IBE to a proposed new MS-DRG
titled, ``Concomitant Endovascular Abdominal Aorta and Iliac Branch
Procedures''.
In review of this request, we analyzed claims data from the
September 2024 update of the FY 2024 MedPAR file for MS-DRGs 268 and
269 and for cases reporting standard EVAR using an AAA endoprosthesis
compared to cases reporting EVAR using an AAA endoprosthesis with an
IBE that are used to treat aortoiliac and iliac artery aneurysms with
the previously listed procedure codes. The findings from our analysis
are shown in the following table.
[[Page 18031]]
------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
------------------------------------------------------------------------
MS-DRG 268--All cases................. 2,519 9.1 $62,984
MS-DRG 268--Cases reporting standard 1,500 7.4 63,877
EVAR using an AAA endoprosthesis.....
MS-DRG 268--Cases reporting EVAR using 193 8.2 68,145
an AAA endoprosthesis with an IBE....
MS-DRG 269--All cases................. 10,108 2.0 39,165
MS-DRG 269--Cases reporting standard 8,655 1.8 38,562
EVAR using an AAA endoprosthesis.....
MS-DRG 269--Cases reporting EVAR using 871 1.8 48,159
an AAA endoprosthesis with an IBE....
------------------------------------------------------------------------
As shown in the table, we identified a total of 2,519 cases within
MS-DRG 268 with an average length of stay of 9.1 days and average costs
of $62,984. Of the 2,519 cases, we found 1,500 cases reporting standard
EVAR using an AAA endoprosthesis with an average length of stay of 7.4
days and average costs of $63,877 and 193 cases reporting EVAR using an
AAA endoprosthesis with an IBE with an average length of stay of 8.2
days and average costs of $68,145. The data show that the cases
reporting standard EVAR using an AAA endoprosthesis have a shorter
average length of stay (7.4 days versus 8.2 days) and lower average
costs ($63,877 versus $68,145) compared to the average costs of the
cases reporting EVAR using an AAA endoprosthesis with an IBE. The data
further show that the 193 cases reporting EVAR using an AAA
endoprosthesis with an IBE have a shorter average length of stay (8.2
days versus 9.1 days) and higher average costs ($68,145 versus $62,984)
compared to the average length of stay and average costs of all the
cases in MS-DRG 268.
For MS-DRG 269, we identified a total of 10,108 cases with an
average length of stay of 2.0 days and average costs of $39,165. Of the
10,108 cases, we found 8,655 cases reporting standard EVAR using an AAA
endoprosthesis with an average length of stay of 1.8 days and average
costs of $38,562 and 871 cases reporting EVAR using an AAA
endoprosthesis with an IBE with an average length of stay of 1.8 days
and average costs of $48,159. The data show that the cases reporting
standard EVAR using an AAA endoprosthesis have a comparable average
length of stay (1.8 days versus 1.8 days) and lower average costs
($38,562 versus $48,159) compared to the cases reporting EVAR using an
AAA endoprosthesis with an IBE. The data further show that the 871
cases reporting EVAR using an AAA endoprosthesis with an IBE have a
shorter average length of stay (1.8 days versus 2.0 days) and higher
average costs ($48,159 versus $39,165) compared to the average length
of stay and average costs of all the cases in MS-DRG 269.
The findings suggest that the cases reporting EVAR using an AAA
endoprosthesis with an IBE utilize greater resources compared to the
cases reporting standard EVAR using an AAA endoprosthesis. We agree
that patients who have aortoiliac and iliac aneurysms are a more
complex population to treat, contributing to increased resource
utilization.
Based on our review and analysis of the cases reporting standard
EVAR using an AAA endoprosthesis compared to the cases reporting EVAR
using an AAA endoprosthesis with an IBE to treat aortoiliac and iliac
artery aneurysms in MS-DRGs 268 and 269, we believe new MS-DRGs are
warranted to differentiate the utilization of resources between
standard EVAR to treat AAA and EVAR to treat AAA extending into the
iliac artery.
Consistent with our established process as discussed in section
II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule,
once the decision has been made to propose to make further
modifications to the MS-DRGs, such as creating a new base MS-DRG, all
five criteria to create subgroups must be met for the base MS-DRG to be
split (or subdivided) by a CC subgroup. Therefore, we applied the
criteria to create subgroups in a base MS-DRG. We note that, as shown
in the table that follows, a three-way split of this proposed new base
MS-DRG failed to meet the criterion that at least 500 or more cases are
in each subgroup. It also failed to meet the criterion that there be at
least a 20 percent difference in average costs between the CC and NonCC
(without CC/MCC) subgroup and at least a $2,000 difference in average
costs between the CC and NonCC (without CC/MCC) subgroup. The following
table illustrates our findings.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 193 8.2 $68,145
With CC......................................................... 419 2.3 48,415
Without CC/MCC.................................................. 452 1.3 47,921
----------------------------------------------------------------------------------------------------------------
As discussed in section II.C.1.b. of the preamble of this FY 2026
IPPS/LTCH PPS proposed rule, if the criteria for a three-way split
fail, the next step is to determine if the criteria are satisfied for a
two-way split. We therefore applied the criteria for a two-way split
for the ``with MCC and without MCC'' subgroups. We note that, as shown
in the table that follows, a two-way split of this base MS-DRG failed
to meet the criterion that there be at least 500 cases in the with MCC
subgroup.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 193 8.2 $68,145
Without MCC..................................................... 871 1.8 48,159
----------------------------------------------------------------------------------------------------------------
[[Page 18032]]
We then applied the criteria for a two-way split for the ``with CC/
MCC'' and ``without CC/MCC'' subgroups. As shown in the table that
follows, a two-way split of this base MS-DRG failed to meet the
criterion that there be at least 500 or more cases in the without CC/
MCC subgroup and at least a 20 percent difference in average costs
between the with CC/MCC and without CC/MCC subgroup.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With CC/MCC..................................................... 612 4.2 $54,637
Without CC/MCC.................................................. 452 1.3 47,921
----------------------------------------------------------------------------------------------------------------
We note that because the criteria for both of the two-way splits
failed, a split (or CC subgroup) is not warranted for the proposed new
base MS-DRG. As a result, for FY 2026, we are proposing to create new
base MS-DRG 213 (Endovascular Abdominal Aorta and Iliac Branch
Procedures). The following table reflects a simulation of the proposed
new base MS-DRG.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
Proposed MS-DRG 213............................................. 1,064 3.0 $51,784
----------------------------------------------------------------------------------------------------------------
b. Concomitant Single Valve Procedure With Open Surgical Ablation
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44836 through
44848), we discussed a two-part request we received to review the MS-
DRG assignments for cases involving the surgical ablation procedure for
atrial fibrillation. The first part of the request was to create a new
classification of surgical ablation MS-DRGs to better accommodate the
costs of open concomitant surgical ablations. The second part of the
request was to reassign cases describing standalone percutaneous
endoscopic surgical ablation. In the part of the request relating to
the costs of open concomitant surgical ablations, the requestor
identified the following potential procedure combinations that would
comprise an ``open concomitant surgical ablation'' procedure.
Open coronary artery bypass graft (CABG) + open surgical
ablation
Open mitral valve repair or mitral valve replacement (MVR) +
open surgical ablation
Open aortic valve repair or mitral valve replacement (AVR) +
open surgical ablation
Open MVR + open AVR + open surgical ablation
Open MVR + open CABG + open surgical ablation
Open MVR + open AVR + open CABG + open surgical ablation
Open AVR + open CABG + open surgical ablation
As discussed in the FY 2022 IPPS/LTCH PPS final rule, we examined
claims data from the March 2020 update of the FY 2019 MedPAR file and
the September 2020 update of the FY 2020 MedPAR file for cases
reporting procedure code combinations describing open concomitant
surgical ablations and stated our analysis showed while the average
lengths of stay and average costs of cases reporting procedure code
combinations describing open concomitant surgical ablations are higher
than all cases in their respective MS-DRG, we found variation in the
volume, length of stay, and average costs of the cases.
In the FY 2022 IPPS/LTCH PPS final rule, for the reasons discussed,
we finalized our proposal to revise the surgical hierarchy for the MS-
DRGs in MDC 05 (Diseases and Disorders of the Circulatory System) to
sequence MS-DRGs 231-236 (Coronary Bypass, with or without PTCA, with
or without Cardiac Catheterization or Open Ablation, with and without
MCC, respectively) above MS-DRGs 228 and 229 (Other Cardiothoracic
Procedures with and without MCC, respectively), effective October 1,
2021. In addition, we also finalized the assignment of cases with a
procedure code describing coronary bypass and a procedure code
describing open ablation to MS-DRGs 233 and 234 and changed the titles
of these MS-DRGs to ``Coronary Bypass with Cardiac Catheterization or
Open Ablation with and without MCC, respectively'' to reflect this
reassignment for FY 2022.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48845 through
48849), we discussed a request we received to again review the MS-DRG
assignment of cases involving open concomitant surgical ablation
procedures. The requestor stated they continue to believe that the
average hospital costs for surgical ablation for atrial fibrillation
demonstrates a cost disparity compared to all procedures within their
respective MS-DRGs. The requestor suggested that when open surgical
ablation is performed with MVR, or AVR or MVR/AVR + CABG that these
procedures are either (1) assigned to a different family of MS-DRGs or
(2) assigned to MS-DRGs 216 and 217 (Cardiac Valve and Other Major
Cardiothoracic Procedures with Cardiac Catheterization with MCC and
with CC, respectively) similar to what CMS did with CABG and open
ablation procedures in the FY 2022 rulemaking to better accommodate the
added cost of open concomitant surgical ablation.
We stated our analysis using the September 2021 update of the FY
2021 MedPAR file reflected that the cases reporting an open concomitant
surgical ablation code combination are predominately found in the
higher (CC or MCC) severity level MS-DRGs of their current base MS-DRG
assignment, suggesting that the patient's co-morbid conditions may also
be contributing to the higher costs of these cases. Secondly, for the
numerous procedure combinations that would comprise an ``open
concomitant surgical ablation'' procedure, the increase in average
costs appeared to directly correlate with the number of procedures
performed. For example, cases that describe ``Open MVR + Open surgical
ablation'' generally demonstrated costs that were lower than cases that
describe ``Open MVR + Open AVR + Open CABG + Open surgical ablation.''
Therefore, we stated we believe that additional time was needed to
allow for further analysis of the claims data to
[[Page 18033]]
determine to what extent the patient's co-morbid conditions are also
contributing to higher costs and to identify other contributing factors
that might exist with respect to the increased length of stay and costs
of these cases in these MS-DRGs. For the reasons summarized, and after
consideration of the public comments we received, we did not make any
MS-DRG changes for cases involving the open concomitant surgical
ablation procedures for FY 2023.
As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58681
through 58690), we again received a request to review the MS-DRG
assignment of cases involving open concomitant surgical ablation
procedures. The requestor recommended that CMS reassign open
concomitant surgical ablation procedures for atrial fibrillation (AF)
from MS-DRGs 219, 220, and 221 (Cardiac Valve and Other Major
Cardiothoracic Procedures without Cardiac Catheterization with MCC,
with CC, and without CC/MCC, respectively) to MS-DRGs 216, 217, and
218. The requestor further recommended that if CMS does not reassign
cases involving open concomitant surgical ablation procedures to MS-
DRGs 216, 217, and 218, in the alternative, CMS should create new MS-
DRGs for all open mitral or aortic valve repair or replacement
procedures with concomitant surgical ablation for AF to improve
clinical coherence when three to four open heart procedures are
performed in one setting.
The requestor stated that cases reporting open surgical ablation
procedures for AF performed during open valve repair/replacement
procedures are typically assigned to MS-DRGs 216, 217, 218, 219, 220,
and 221, with the majority of the cases being assigned to MS-DRGs 219,
220, and 221 because of the surgical hierarchy in MDC 05 and because
there is less of a need for cardiac catheterization in these cases. We
stated in the final rule that the requestor performed its own data
analysis, and stated their analysis showed that the data continues to
demonstrate that claims with open surgical ablation procedures for AF
are not clinically similar to the remaining cases in MS-DRGs 219, 220,
and 221, and there are significant differences in resource utilization
that reflect those clinical differences.
We noted in FY 2024 IPPS/LTCH PPS final rule that our analysis of
the claims data suggested that it is the performance of an aortic valve
repair or replacement procedure, a mitral valve repair or replacement
procedure plus another concomitant procedure that is associated with
increased hospital resource utilization, not solely the performance of
open surgical ablation as suggested by the requestor, when compared to
other cases in their respective MS-DRGs. Therefore, for the reasons
discussed, we finalized our proposal to create MS-DRG 212 (Concomitant
Aortic and Mitral Valve Procedures) in MDC 05 for cases reporting an
aortic valve repair or replacement procedure, a mitral valve repair or
replacement procedure, and another concomitant procedure.
For this FY 2026 IPPS/LTCH PPS proposed rule, we again received a
request to review the MS-DRG assignment of cases involving a single
open surgical valve procedure with an open surgical ablation. The
requestor recommended that CMS reassign cases involving a single open
surgical valve procedure with an open surgical ablation from MS-DRGs
219, 220, and 221 (Cardiac Valve and Other Major Cardiothoracic
Procedures without Cardiac Catheterization with MCC, with CC, and
without CC/MCC, respectively) to MS-DRGs 216, 217, and 218 (Cardiac
Valve and Other Major Cardiothoracic Procedures with Cardiac
Catheterization with MCC, with CC, and without CC/MCC, respectively).
The requestor also suggested that if finalized, the title for MS-DRGs
216, 217, and 218 should be revised to ``Cardiac valve and Other Major
Cardiothoracic Procedures with Cardiac Catheterization or Open
Ablation, with MCC, with CC or without CC/MCC, respectively.''
The requestor stated MS-DRGs primarily focus on the most resource
intensive procedure, without fully accounting for the overall resource
intensity and complexity of all procedures performed and stated
treating AF as a secondary condition is one such example. The requestor
stated that AF, if not treated early after diagnosis, continues to
worsen and is associated with stroke and mortality risk, and
significantly higher healthcare spending. According to the requestor, a
majority of AF patients undergoing surgical ablation procedures are
older and frailer than non-surgical ablation valvular patients, and
these patients frequently require two or even three procedures during
one hospital visit to treat multiple conditions (AF, valve disease,
heart failure, blocked coronaries). The requestor further stated
patients undergoing multiple cardiac procedures, including surgical
ablation, typically require between two and four hours of additional
time in the operating room, a longer length of stay, and are at an
increased risk for adverse event in recovery and noted that much like
cardiac catheterization procedures, in many instances adding surgical
ablation to open valvular procedures also requires an atriotomy to
better visualize the mitral valve and complete the surgical ablation,
making these concomitant procedures significantly more complex than
single valve procedures performed on their own. The requestor stated
that the current MS-DRG assignments do not adequately pay hospitals for
the resources associated with furnishing surgical ablation procedures
and that therefore, it is increasingly becoming financially unviable
for hospitals to perform these procedures to Medicare beneficiaries in
a single admission.
The requestor asserted that reassigning cases involving a single
open surgical valve procedure with an open surgical ablation, which are
currently assigned in MS-DRGs 219, 220, and 221, to MS-DRGs 216, 217,
and 218 would accommodate the clinical complexity of performing two or
more open heart procedures, would enhance clinical coherence for
patients undergoing multiple procedures within MDC 05, would more
accurately reflect associated costs and resource utilization, and would
help minimize the need for multiple patient admissions. The requestor
performed its own data analysis of the Standard Analytical File (SAF)
FY 2022 Q1--Q3 report and stated they identified 1,938 cases involving
a single open surgical valve procedure with an open surgical ablation
that were assigned to MS-DRGs 219, 220, and 221. The requestor stated
their analysis showed that the impact of reassigning the 1,938 cases
would result in better resource alignment with minimal relative weight
changes. Specifically, the requestor stated that their analysis showed
that if the cases involving a single open surgical valve procedure with
an open surgical ablation that are currently assigned to MS-DRGs 219,
220, and 221 were reassigned to MS-DRGs 216, 217, and 218, the relative
weights of MS-DRGs 216, 217, 218, 219, 220, and 221 would change by -
5.35%, -4.48%, -2.59%, +0.47%, -0.93% and -0.12% respectively.
As previously noted, the requestor recommended that we consider
cases involving a single open surgical valve procedure with an open
surgical ablation, however the requestor did not provide a specific
list of procedure codes for our consideration. Therefore, we reviewed
the ICD-10-PCS classification and identified 81 procedure codes
describing open surgical valve procedures and eight procedure codes
describing open
[[Page 18034]]
surgical ablation procedures. We refer readers to Table 6P.3a
associated with this FY 2026 IPPS/LTCH PPS proposed rule (which is
available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps), which sets forth the
list of ICD-10-PCS procedure codes describing open surgical valve
procedures and open surgical ablation procedures that we examined.
To address this request and to understand the resource use for the
subset of cases reporting procedure codes describing a single open
surgical valve procedure with an open surgical ablation, without
reporting a procedure code describing the performance of a cardiac
catheterization, that are currently grouping to MS-DRGs 219, 220, and
221, we examined claims data from the September 2024 update of the FY
2024 MedPAR file for the average length of stay and average costs for
these cases. Our findings are shown in the following table:
MS-DRGs 219-221--Cases Reporting an Open Valve Procedure and an Open
Surgical Ablation Procedure Without Reporting Cardiac Catheterization
------------------------------------------------------------------------
Average
MS-DRG Number of length of Average
cases stay costs
------------------------------------------------------------------------
219........... All cases............. 13,222 10 $69,728
Cases reporting an 1,657 10.1 67,532
open valve procedure
and an open surgical
ablation procedure
without reporting
cardiac
catheterization.
220........... All cases............. 9,636 6.2 49,514
Cases reporting an 999 6.9 53,603
open valve procedure
and an open surgical
ablation procedure
without reporting
cardiac
catheterization.
221........... All cases............. 1,146 3.6 46,900
Cases reporting an 41 5.6 48,353
open valve procedure
and an open surgical
ablation procedure
without reporting
cardiac
catheterization.
------------------------------------------------------------------------
As shown in the table, the data analysis performed indicates that
the 1,657 cases in MS-DRG 219 reporting an open valve procedure and an
open surgical ablation procedure, without a procedure code describing
the performance of a cardiac catheterization, and with a secondary
diagnosis code designated as an MCC have an average length of stay that
is longer than the average length of stay for all the cases in MS-DRG
219 (10.1 days versus 10 days) and lower average costs when compared to
all the cases in MS-DRG 219 ($67,532 versus $69,728). The difference in
average costs is $2,196 ($69,728-$67,532 = $2,196) for the cases
reporting an open valve procedure and an open surgical ablation
procedure without a procedure code describing the performance of a
cardiac catheterization, and with a secondary diagnosis code designated
as a MCC in MS-DRG 219 when compared to all the cases in MS-DRG 219.
In MS-DRG 220, the 999 cases reporting an open valve procedure and
an open surgical ablation procedure without a procedure code describing
the performance of a cardiac catheterization, and with a secondary
diagnosis code designated as a CC have an average length of stay that
is longer than the average length of stay for all the cases in MS-DRG
220 (6.9 days versus 6.2 days) and higher average costs when compared
to all the cases in MS-DRG 220 ($53,603 versus $49,514). The difference
in average costs is $4,089 ($53,603-$49,514 = $4,089) for the cases
reporting an open valve procedure and an open surgical ablation
procedure without a procedure code describing the performance of a
cardiac catheterization, and with a secondary diagnosis code designated
as a CC in MS-DRG 220 when compared to all the cases in MS-DRG 220.
In MS-DRG 221, the 41 cases reporting an open valve procedure and
an open surgical ablation procedure without a procedure code describing
the performance of a cardiac catheterization, and without a secondary
diagnosis code designated as a CC or MCC have an average length of stay
that is longer than the average length of stay for all the cases in MS-
DRG 221 (5.6 days versus 3.6 days) and higher average costs when
compared to all the cases in MS-DRG 221 ($48,353 versus $46,900). The
difference in average costs is $1,453 ($48,353-$46,900 = $1,453) for
the cases reporting an open valve procedure and an open surgical
ablation procedure without a procedure code describing the performance
of a cardiac catheterization, and without a secondary diagnosis code
designated as a CC or MCC in MS-DRG 221 when compared to all the cases
in MS-DRG 221.
We then examined the data for cases in MS-DRGs 216, 217, and 218,
and our findings are shown in the following table:
------------------------------------------------------------------------
Average
MS-DRG Description Number of length of Average
cases stay costs
------------------------------------------------------------------------
216........... Cardiac Valve and 5,137 13.6 $88,193
Other Major
Cardiothoracic
Procedures with
Cardiac
Catheterization with
MCC.
217........... Cardiac Valve and 1,571 6.8 59,943
Other Major
Cardiothoracic
Procedures with
Cardiac
Catheterization with
CC.
218........... Cardiac Valve and 251 2.9 61,733
Other Major
Cardiothoracic
Procedures with
Cardiac
Catheterization
without CC/MCC.
------------------------------------------------------------------------
The data analysis performed indicates that the cases in MS-DRGs
219, 220, and 221 reporting an open valve procedure and an open
surgical ablation procedure without a procedure code describing the
performance of a cardiac catheterization have a generally longer
average length of stay and lower average costs when compared to all
cases in
[[Page 18035]]
MS-DRGs 216, 217, and 218. As shown in the table, the data analysis
performed indicates that the 1,657 cases in MS-DRG 219 reporting an
open valve procedure and an open surgical ablation procedure without a
procedure code describing the performance of a cardiac catheterization,
and with a secondary diagnosis code designated as an MCC have a shorter
average length of stay (10.1 days versus 13.6 days) and lower average
costs ($67,532 versus $88,193) when compared to all the cases in MS-DRG
216. The difference in average costs is $20,661 ($88,193-$67,532 =
$20,661) for the cases reporting an open valve procedure and an open
surgical ablation procedure without a procedure code describing the
performance of a cardiac catheterization, and with a secondary
diagnosis code designated as a MCC in MS-DRG 219 when compared to all
the cases in MS-DRG 216.
The 999 cases in MS-DRG 220 reporting an open valve procedure and
an open surgical ablation procedure without a procedure code describing
the performance of a cardiac catheterization, and with a secondary
diagnosis code designated as a CC have a longer average length of stay
(6.9 days versus 6.8 days) and lower average costs ($53,603 versus
$59,943) when compared to all the cases in MS-DRG 217. The difference
in average costs is $6,340 ($59,943-$53,603 = $6,340) for the cases
reporting an open valve procedure and an open surgical ablation
procedure without a procedure code describing the performance of a
cardiac catheterization, and with a secondary diagnosis code designated
as a CC in MS-DRG 220 when compared to all the cases in MS-DRG 217.
The 41 cases in MS-DRG 221 reporting an open valve procedure and an
open surgical ablation procedure without a procedure code describing
the performance of a cardiac catheterization, and without a secondary
diagnosis code designated as a CC or MCC have a longer average length
of stay (5.6 days versus 2.9 days) and lower average costs ($48,353
versus $61,733) when compared to all the cases in MS-DRG 218. The
difference in average costs is $13,380 ($61,733-$48,353 = $13,380) for
the cases reporting an open valve procedure and an open surgical
ablation procedure without a procedure code describing the performance
of a cardiac catheterization, and without a secondary diagnosis code
designated as a CC or MCC in MS-DRG 221 when compared to all the cases
in MS-DRG 218.
While the data analysis reflects that cases that report an open
valve procedure and an open surgical ablation procedure without a
procedure code describing the performance of a cardiac catheterization
generally demonstrate slightly higher average costs in their respective
MS-DRGs, we believe these cases are more suitably grouped to MS-DRGs
219, 220, and 221 where they are currently assigned, based on the
closer similarities in resource utilization compared to all the cases
in their respective MS-DRG. As discussed in prior rulemaking (86 FR
44878), the MS-DRG system is a system of averages and it is expected
that within the diagnostic related groups, some cases may demonstrate
higher than average costs, while other cases may demonstrate lower than
average costs. We also provide outlier payments to mitigate extreme
loss on individual cases. Moreover, the data do not indicate cases
reporting an open valve procedure and an open surgical ablation
procedure without a procedure code describing the performance of a
cardiac catheterization utilize similar resources when compared to the
cases assigned to MS-DRGs 216, 217, and 218. The cases are not
clinically coherent with regard to resource utilization as reflected in
the greater differences in average costs.
Further, in examining this request, we note that the requestor
suggested that CMS reassign cases reporting an open valve procedure and
an open surgical ablation procedure without a procedure code describing
the performance of a cardiac catheterization from MS-DRGs 219, 220, and
221 (Cardiac Valve and Other Major Cardiothoracic Procedures without
Cardiac Catheterization with MCC, with CC, and without CC/MCC,
respectively) to MS-DRGs 216, 217, and 218 for FY 2026, however, as
discussed in prior rulemaking (86 FR 44830, 87 FR 48847, and 88 FR
58683), MS-DRGs 216, 217, and 218 are defined by the performance of
cardiac catheterization. We continue to be concerned about the effect
on clinical coherence of assigning cases reporting an open valve
procedure and an open surgical ablation procedure that do not also have
a cardiac catheterization procedure reported to MS-DRGs that are
defined by the performance of that procedure. Our claims analysis for
this FY 2026 IPPS/LTCH PPS proposed rule continues to reflect the
difference in average costs demonstrated by the two cohorts, as cases
reporting the performance of a cardiac catheterization in MS-DRGs 216,
217, and 218 continue to demonstrate higher average costs.
As stated previously, our analysis of the claims data continues to
reflect that cases reporting an open valve procedure and an open
surgical ablation procedure without a procedure code describing the
performance of a cardiac catheterization are clinically coherent in
their currently assigned MS-DRGs. Therefore, we are proposing to
maintain the structure of MS-DRGs 216, 217, and 218 for FY 2026. We are
also proposing to maintain the title of MS-DRGs 216, 217, and 218 as
``Cardiac Valve and Other Major Cardiothoracic Procedures with Cardiac
Catheterization with MCC, with CC, and without CC/MCC, respectively''
for FY 2026.
c. Transcatheter Aortic Valve Replacement Procedures for Aortic
Regurgitation
Transcatheter aortic valve replacement (TAVR) is a minimally
invasive procedure that involves a catheter being inserted into an
artery, without an incision for most cases, and then guided to the
heart. The catheter delivers the new valve without the need for the
chest or heart to be surgically opened. For this FY 2026 IPPS/LTCH PPS
proposed rule, we received a request to reassign cases reporting TAVR
procedures for aortic regurgitation (AR) from MS-DRGs 266 and 267
(Endovascular Cardiac Valve Replacement with or without MCC,
respectively) to what the requester described as a more clinically and
cost cohesive MS-DRG such as MS-DRG 215 (Other Heart Assist System
Implant) and to revise the title of MS-DRG 215 to ``Other Heart Assist
System Implant or Endovascular Cardiac Regurgitant Valve Replacement
Procedures.''
According to the requestor, Medicare patients with severe,
symptomatic AR often present with chronic, congestive heart failure,
which equates to significantly greater diastolic heart failure, atrial
fibrillation, and concomitant kidney, liver, and biventricular failure.
As a result, managing this systemic damage requires a multidisciplinary
care team, comprising of implanting physicians, cardiac surgeons,
imaging cardiologists, and heart failure specialists, similar to the
management required for cases currently assigned to MS-DRG 215.
Further, the requestor stated TAVR procedures for AR prevent patients
from devolving into heart failure and are clinically more comparable to
short term heart assist device support. The requestor stated
regurgitant valve disease, such as AR, is a whole-heart cardiac disease
that has systemic manifestations that leads to biventricular heart
failure and non-cardiac morbidity, while stenotic valve disease, such
as aortic stenosis (AS), is less often associated with non-cardiac
dysfunction. According to the requestor,
[[Page 18036]]
managing a diagnosis of AR leads to inpatient lengths of stay that are
double the duration of the length of stay of patients with AS, as
management of AS only requires the involvement of the implanting
physician and the cardiac surgeon.
The requestor identified TAVR for AR with ICD-10-CM diagnosis code
I35.1 (Nonrheumatic aortic (valve) insufficiency) and ICD-10-PCS
procedure code 02RF38Z (Replacement of aortic valve with zooplastic
tissue, percutaneous approach) and performed their own analysis of the
FY2023 Final MedPAR data. The requestor stated they found the cases
reporting a diagnosis of aortic regurgitation in MS-DRG 266 and 267
have 20% higher average costs (AR = $54,425 versus AS = $45,323), two
times the length of stay (AR = 5 days versus AS = 2.5 days) and trigger
outlier payments two times more often (AR = 11.43% versus AS = 5.82%)
compared to the cases reporting a diagnosis of aortic stenosis in MS-
DRGs 266 and 267. The requestor noted in order to perform their
analysis, they excluded cases reporting procedure codes describing the
insertion of a percutaneous short-term external heart assist device by
removing cases that reported ICD-10-PCS procedure codes 02HA3RZ
(Insertion of short-term external heart assist system into heart,
percutaneous approach) and 5A0221D (Assistance with cardiac output
using impeller pump, continuous) from their analyses, as the requestor
asserted those procedure codes were reassigned to MS-DRGs 001 and 002
(Heart Transplant or Implant of Heart Assist System with MCC and
without MCC, respectively) in FY 2024.
As stated previously, the requestor identified TAVR procedures for
AR with ICD-10-CM diagnosis code I35.1 (Nonrheumatic aortic (valve)
insufficiency) and ICD-10-PCS procedure code 02RF38Z (Replacement of
aortic valve with zooplastic tissue, percutaneous approach). In
reviewing this request, we identified five additional ICD-10-CM
diagnosis codes that also describe aortic regurgitation and included
these codes in our analysis. The five ICD-10-CM diagnosis codes we
identified are listed in the following table.
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
I06.1.............................. Rheumatic aortic insufficiency.
I08.0.............................. Rheumatic disorders of both mitral
and aortic valves.
I08.2.............................. Rheumatic disorders of both aortic
and tricuspid valves.
I08.3.............................. Combined rheumatic disorders of
mitral, aortic and tricuspid
valves.
I35.2.............................. Nonrheumatic aortic (valve)
stenosis with insufficiency.
------------------------------------------------------------------------
Also, we identified eight additional ICD-10-PCS procedure codes
that describe TAVR procedures as well, and similarly included these
codes in our analysis. The eight ICD-10-PCS procedure codes we
identified are listed in the following table.
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
02RF37H............................ Replacement of aortic valve with
autologous tissue substitute,
transapical, percutaneous
approach.
02RF37Z............................ Replacement of aortic valve with
autologous tissue substitute,
percutaneous approach.
02RF38H............................ Replacement of aortic valve with
zooplastic tissue, transapical,
percutaneous approach.
02RF38N............................ Replacement of aortic valve with
zooplastic tissue, using rapid
deployment technique, percutaneous
approach.
02RF3JH............................ Replacement of aortic valve with
synthetic substitute, transapical,
percutaneous approach.
02RF3JZ............................ Replacement of aortic valve with
synthetic substitute, percutaneous
approach.
02RF3KH............................ Replacement of aortic valve with
nonautologous tissue substitute,
transapical, percutaneous
approach.
02RF3KZ............................ Replacement of aortic valve with
nonautologous tissue substitute,
percutaneous approach.
------------------------------------------------------------------------
To begin our analysis, we reviewed the GROUPER logic. The requestor
is correct that nine ICD-10-PCS codes that describe TAVR procedures
mentioned previously are currently assigned to MS-DRGs 266 and 267. The
requestor is also correct that in the FY 2024 IPPS/LTCH PPS final rule
(88 FR 58690 through 58696), we discussed a request we received to
reassign certain cases reporting procedure codes describing the
insertion of a short-term external heart assist device from MS-DRG 215
to MS-DRGs 001 and 002. We stated temporary heart assist devices are
intended to support blood pressure and provide increased blood flow to
critical organs in patients with cardiogenic shock, by drawing blood
out of the heart and pumping it into the aorta, partially or fully
bypassing the left ventricle to provide adequate circulation of blood
(replace or supplement left ventricle pumping) while also allowing
damaged heart muscle the opportunity to rest and recover in patients
who need short-term support.
In the FY 2024 IPPS/LTCH PPS final rule, we stated that we examined
the claims data and the data suggested that overall, cases reporting a
procedure code describing the open insertion of a short-term external
heart assist device may be more appropriately aligned with the average
costs of the cases in MS-DRGs 001 and 002 in comparison to MS-DRG 215,
even though the average length of stay is shorter. We also stated that
we reviewed the clinical considerations along with this data analysis
and agreed that cases reporting a procedure code that describes the
open insertion of a short-term external heart assist device are
generally more resource intensive and are clinically distinct from
other cases reporting procedure codes describing the insertion of
short-term external heart devices by other approaches currently
assigned to MS-DRG 215. Therefore, for the reasons discussed and after
consideration of the public comments we received, we finalized our
proposal to reassign ICD-10-PCS code 02HA0RZ (Insertion of short-term
external heart assist system into heart, open approach) from MS-DRG 215
in MDC 05 to Pre-MDC MS-DRGs 001 and 002 when reported as a standalone
procedure for FY 2024. Under this finalization, procedure code 02HA0RZ
no longer needs to be reported as part of a procedure code combination
or procedure code ``cluster'' to satisfy the logic for assignment to
MS-DRGs 001 and 002. We refer the reader to the ICD-
[[Page 18037]]
10 MS-DRG Definitions Manual, Version 42.1 (available on the CMS
website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for
complete documentation of the GROUPER logic for MS-DRGs 001, 002, 215,
266 and 267.
While the requestor stated that procedure code 02HA3RZ (Insertion
of short-term external heart assist system into heart, percutaneous
approach) and procedure code 5A0221D (Assistance with cardiac output
using impeller pump, continuous) were reassigned to MS-DRGs 001 and 002
(Heart Transplant or Implant of Heart Assist System with MCC and
without MCC, respectively) in FY 2024, we note that our finalization in
the FY 2024 IPPS/LTCH PPS final rule did not involve modifying the MS-
DRG assignment of procedure code 02HA3RZ or procedure code 5A0221D. In
Version 42.1, cases reporting procedure codes 02HA3RZ and 5A0221D,
continue to be assigned to MS-DRG 215. We refer the reader to Appendix
E of the ICD-10 MS-DRG Definitions Manual, Version 42.1 (available on
the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for the MS-DRG assignments of procedure codes 02HA0RZ,
02HA3RZ, and 5A0221D.
Next, we examined claims data from the September 2024 update of the
FY 2024 MedPAR file for MS-DRG 266 and 267 to identify cases reporting
one of the six ICD-10-CM codes listed previously that describe aortic
regurgitation as a principal or a secondary diagnosis with one of the
nine procedure codes that describe a TAVR procedure. Our findings are
shown in the following table:
MS-DRGs 266-267--All Cases and Cases Reporting a Procedure Code Describing TAVR With a Principal or Secondary
Diagnosis of Aortic Regurgitation
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
266............................ All cases...................... 22,083 4.5 $55,402
Cases reporting a procedure 3,616 5.7 56,010
code describing TAVR with a
principal or secondary
diagnosis of aortic
regurgitation.
267............................ All Cases...................... 36,405 1.5 43,282
Cases reporting a procedure 4,521 1.6 41,189
code describing TAVR with a
principal or secondary
diagnosis of aortic
regurgitation.
----------------------------------------------------------------------------------------------------------------
As shown in the table, in MS-DRG 266, we identified a total of
22,083 cases with an average length of stay of 4.5 days and average
costs of $55,402. Of those 22,083 cases, there were 3,616 cases
reporting a procedure code describing TAVR with a principal or
secondary diagnosis of aortic regurgitation, with average costs higher
than the average costs in the FY 2024 MedPAR file for MS-DRG 266
($56,010 compared to $55,402) and a longer average length of stay (5.7
days compared to 4.5 days). In MS-DRG 267, we identified a total of
36,405 cases with an average length of stay of 1.5 days and average
costs of $43,282. Of those 36,405 cases, there were 3,616 cases
reporting a procedure code describing TAVR with a principal or
secondary diagnosis of aortic regurgitation, with average costs lower
than the average costs in the FY 2024 MedPAR file for MS-DRG 267
($41,189 compared to $43,282) and a longer average length of stay (1.6
days compared to 1.5 days).
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR for MS-DRG 215. Our findings are shown in the following
table.
----------------------------------------------------------------------------------------------------------------
Average
MS-DRG Number of length of Average costs
cases stay
----------------------------------------------------------------------------------------------------------------
215............................................................. 3,257 8.2 $87,701
----------------------------------------------------------------------------------------------------------------
Our analysis indicates that the cases assigned to MS-DRG 215 have
much higher average costs ($87,701 versus $56,010 or $41,189) and a
much longer length of stay (8.2 days versus 5.7 days or 1.6 days) than
the cases reporting a procedure code describing TAVR with a principal
or secondary diagnosis of aortic regurgitation currently assigned to
MS-DRGs 266 or 267, respectively. Instead, the average costs and
average length of stay for cases reporting a procedure code describing
TAVR with a principal or secondary diagnosis of aortic regurgitation
appear to be generally more aligned with the average costs and average
length of stay for all cases in MS-DRGs 266 and 267, where they are
currently assigned.
In addition, based on our review of the clinical considerations, we
do not believe the procedure codes describing a TAVR are clinically
coherent with the procedure codes currently assigned to MS-DRG 215.
Heart assist devices, such as ventricular assist devices and artificial
heart systems, provide circulatory support by taking over most of the
workload of the left ventricle. Blood enters the pump through an inflow
conduit connected to the left ventricle and is ejected through an
outflow conduit into the body's arterial system. Heart assist devices
can provide temporary left, right, or biventricular support for
patients whose hearts have failed and can also be used as a bridge for
patients who are awaiting a heart transplant. While we agree that TAVR
can be a treatment option for patients with severe AR who are at high
risk for mortality or complications due to advanced age and multiple
comorbidities, we do not believe the procedure codes describing TAVR
should be assigned to MS-DRG 215. AR is a condition where the aortic
valve doesn't close properly causing blood to leak back into the heart.
While we acknowledge that if not treated AR can gradually worsen and
lead to left ventricular enlargement and eventually heart failure, we
believe that patients
[[Page 18038]]
with indications for heart assist devices tend to be more severely ill
and these inpatient admissions are associated with greater resource
utilization as evidenced by the higher average costs and longer lengths
of stay. Therefore, for the reasons stated previously, we are proposing
to maintain the GROUPER logic for MS-DRGs 266 and 267 for FY 2026. We
are also proposing to maintain the title of MS-DRGs 215 as ``Other
Heart Assist System Implant'' for FY 2026.
d. Percutaneous Coronary Atherectomy
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58704 through
58712), we discussed a request we received to review the MS-DRG
assignment of cases describing percutaneous coronary intravascular
lithotripsy (IVL). Coronary IVL is utilized in a subset of percutaneous
coronary intervention (PCI) procedures when the artery is severely
calcified. According to the requestor, PCIs involving coronary IVL are
clinically more complex because coronary IVL is a therapy deployed
exclusively in severely calcified coronary lesions, and these lesion
types are associated with longer procedure times and increased
utilization of hospital resources. In analyzing this request, we stated
in the FY 2024 IPPS/LTCH PPS final rule that the data analysis showed
that the average costs of cases reporting percutaneous coronary IVL,
with or without involving the insertion of an intraluminal device, were
higher than for all cases in their respective MS-DRG. Therefore for FY
2024, taking into consideration that it clinically requires greater
resources to perform coronary intravascular lithotripsy, and after
consideration of the public comments we received, we finalized our
proposal to create MS-DRG 323 (Coronary Intravascular Lithotripsy with
Intraluminal Device with MCC), MS-DRG 324 (Coronary Intravascular
Lithotripsy with Intraluminal Device without MCC) and MS-DRG 325
(Coronary Intravascular Lithotripsy without Intraluminal Device) in MDC
05.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69000 through
69002), we discussed requests to modify the GROUPER logic in a number
of cardiac MS-DRGs under MDC 05 (Diseases and Disorders of the
Circulatory System) for which we stated further research and analysis
were required, and which we would continue to consider in connection
with future rulemaking. Specifically, we discussed requests we received
to modify the GROUPER logic of MS-DRGs 323, 324, and 325. In two
separate but related requests, the requestors suggested that we add
procedure codes that describe additional PCI procedures, such as
percutaneous coronary rotational, laser, and orbital atherectomy, to
the GROUPER logic of new MS-DRGs 323, 324, and 325.
In the FY 2025 IPPS/LTCH PPS final rule, we noted that as stated in
prior rule making (88 FR 58708), atherectomy is distinct from coronary
lithotripsy in that each of these procedures are defined by clinically
distinct definitions and objectives. We stated additional analysis to
assess for unintended consequences across the classification was needed
as we have made a distinction between the root operations used to
describe atherectomy (Extirpation) and the root operation used to
describe lithotripsy (Fragmentation) in evaluating other requests in
rulemaking. We stated we would need to consider the application of
these two root operations in other scenarios where we have also
specifically stated that Extirpation is not the same as Fragmentation
and do not warrant similar MS-DRG assignment (85 FR 58572 through
58573). Furthermore, as MS-DRGs 323, 324, and 325 had recently become
effective on October 1, 2023 (FY 2024), we stated additional time was
needed to review and evaluate extensive modifications to the structure
of these MS-DRGs.
For this FY 2026 IPPS/LTCH PPS proposed rule, we received a request
to reassign percutaneous coronary atherectomy procedures from MS-DRGs
250 and 251 (Percutaneous Cardiovascular Procedures without
Intraluminal Device with MCC and without MCC, respectively) and MS-DRGs
321 and 322 (Percutaneous Cardiovascular Procedures with Intraluminal
Device with MCC or 4+ Arteries/Intraluminal Devices and without MCC,
respectively) to MS-DRGs 323, 324, and 325 where cases reporting
percutaneous coronary IVL are assigned. Atherectomy is a procedure used
to remove plaque buildup from the inside of arteries. The requestor
stated that coronary atherectomy and coronary IVL target the same step
of the PCI treatment process (that is, reducing the burden of calcium
by preparing the vessel prior to stent delivery). The requestor further
stated that coronary atherectomy is more clinically similar to coronary
IVL than other routine vessel preparation techniques (such as
angioplasty) in that both coronary atherectomy and coronary IVL are
used to modify severe coronary calcium, treat the same patient
population, and have the same intended clinical use for complex vessel
preparation. Complex vessel preparation is required to increase the
diameter of an artery's lumen in severely calcified lesions and
improves revascularization by debulking calcification which enables
better intraluminal device deployment and improved drug uptake into the
vessel wall. Similar to lithotripsy, after percutaneous atherectomy is
performed, the provider can implant an intraluminal device, also called
a stent, to keep the vessel open.
According to the requestor, removing percutaneous coronary
atherectomy procedures from their current MS-DRG assignments and
assigning them to MS-DRGs 323, 324, and 325 would reduce cost variance
and improve clinical coherence across all PCI MS-DRGs. The requestor
also stated that as atherectomy procedures involve more complex
calcified lesions and require greater resources, it is not clinically
or cost coherent to maintain their current MS-DRG assignments,
therefore creating a new MS-DRG for all cases involving percutaneous
coronary atherectomy procedures was a reasonable alternative option if
CMS did not agree with the reassignment of these cases to MS-DRGs 323,
324, and 325.
The requestor identified eight ICD-10-PCS codes that they state
describe percutaneous coronary atherectomy. The eight codes the
requestor identified are listed in the following table.
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
02C03Z7............................ Extirpation of matter from coronary
artery, one artery, orbital
atherectomy technique,
percutaneous approach.
02C03ZZ............................ Extirpation of matter from coronary
artery, one artery, percutaneous
approach.
02C13Z7............................ Extirpation of matter from coronary
artery, two arteries, orbital
atherectomy technique,
percutaneous approach.
02C13ZZ............................ Extirpation of matter from coronary
artery, two arteries, percutaneous
approach.
02C23Z7............................ Extirpation of matter from coronary
artery, three arteries, orbital
atherectomy technique,
percutaneous approach.
02C23ZZ............................ Extirpation of matter from coronary
artery, three arteries,
percutaneous approach.
02C33Z7............................ Extirpation of matter from coronary
artery, four or more arteries,
orbital atherectomy technique,
percutaneous approach.
[[Page 18039]]
02C33ZZ............................ Extirpation of matter from coronary
artery, four or more arteries,
percutaneous approach.
------------------------------------------------------------------------
While we agree with the requestor that the eight procedure codes
listed in the previous table describe percutaneous coronary
atherectomy, we note there are additional ICD-10-PCS codes that
describe percutaneous coronary atherectomy in the GROUPER logic for MS-
DRGs 250, 251, 321, and 322. Therefore, in reviewing this request, we
identified 12 additional ICD-10-PCS procedure codes that also describe
percutaneous or percutaneous endoscopic coronary atherectomy procedures
and included these codes in our analysis. The 12 codes we identified
are listed in the following table.
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
02C03Z6............................ Extirpation of matter from coronary
artery, one artery, bifurcation,
percutaneous approach.
02C04Z6............................ Extirpation of matter from coronary
artery, one artery, bifurcation,
percutaneous endoscopic approach.
02C04ZZ............................ Extirpation of matter from coronary
artery, one artery, percutaneous
endoscopic approach.
02C13Z6............................ Extirpation of matter from coronary
artery, two arteries, bifurcation,
percutaneous approach.
02C14Z6............................ Extirpation of matter from coronary
artery, two arteries, bifurcation,
percutaneous endoscopic approach.
02C14ZZ............................ Extirpation of matter from coronary
artery, two arteries, percutaneous
endoscopic approach.
02C23Z6............................ Extirpation of matter from coronary
artery, three arteries,
bifurcation, percutaneous
approach.
02C24Z6............................ Extirpation of matter from coronary
artery, three arteries,
bifurcation, percutaneous
endoscopic approach.
02C24ZZ............................ Extirpation of matter from coronary
artery, three arteries,
percutaneous endoscopic approach.
02C33Z6............................ Extirpation of matter from coronary
artery, four or more arteries,
bifurcation, percutaneous
approach.
02C34Z6............................ Extirpation of matter from coronary
artery, four or more arteries,
bifurcation, percutaneous
endoscopic approach.
02C34ZZ............................ Extirpation of matter from coronary
artery, four or more arteries,
percutaneous endoscopic approach.
------------------------------------------------------------------------
We refer the reader to the ICD-10 MS-DRG Definitions Manual,
Version 42.1 (available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for complete documentation of the
GROUPER logic for MS-DRGs 250, 251, 321, and 322.
To begin our analysis, we examined claims data from the September
2024 update of the FY 2024 MedPAR file for MS-DRGs 250, 251, 321, and
322 to identify cases reporting a procedure code describing
percutaneous or percutaneous endoscopic coronary atherectomy and
compared the results to all cases in their respective MS-DRG. Our
findings are shown in the following table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
250............................ All cases...................... 3,047 4.4 $21,383
Cases reporting percutaneous or 493 4.6 25,139
percutaneous endoscopic
coronary atherectomy.
251............................ All cases...................... 2,515 2.4 14,521
Cases reporting percutaneous or 340 2.5 18,121
percutaneous endoscopic
coronary atherectomy.
321............................ All cases...................... 32,517 5.0 26,309
Cases reporting percutaneous or 3,307 5.1 31,886
percutaneous endoscopic
coronary atherectomy.
322............................ All cases...................... 46,600 2.4 16,792
Cases reporting percutaneous or 3,134 2.5 20,889
percutaneous endoscopic
coronary atherectomy.
----------------------------------------------------------------------------------------------------------------
As shown by the table, in MS-DRG 250, we identified a total of
3,047 cases, with an average length of stay of 4.4 days and average
costs of $21,383. Of those 3,047 cases, there were 493 cases reporting
percutaneous or percutaneous endoscopic coronary atherectomy without
reporting the insertion of an intraluminal device, with higher average
costs as compared to all cases in MS-DRG 250 ($25,139 compared to
$21,383), and a longer average length of stay (4.6 days compared to 4.4
days). In MS-DRG 251, we identified a total of 2,515 cases with an
average length of stay of 2.4 days and average costs of $14,521. Of
those 2,515 cases, there were 340 cases reporting percutaneous or
percutaneous endoscopic coronary atherectomy without reporting the
insertion of an intraluminal device, with higher average costs as
compared to all cases in MS-DRG 251 ($18,121 compared to $14,521), and
a longer average length of stay (2.5 days compared to 2.4 days).
In MS-DRG 321, we identified a total of 32,517 cases with an
average length of stay of 5.0 days and average costs of $26,309. Of
those 32,517 cases, there were 3,307 cases reporting percutaneous or
percutaneous endoscopic coronary atherectomy with the insertion of an
intraluminal device, with higher average costs as compared to all cases
in MS-DRG 321 ($31,886 compared to $26,309), and a longer average
length of stay (5.1 days compared to 5.0 days). In MS-DRG 322, we
identified a total of 46,600 cases with an average length of stay of
2.4 days and average costs of $16,792. Of those 46,600 cases, there
were 3,134 cases reporting percutaneous or percutaneous endoscopic
coronary atherectomy with the insertion of an
[[Page 18040]]
intraluminal device, with higher average costs as compared to all cases
in MS-DRG 322 ($20,889 compared to $16,792), and a longer average
length of stay (2.5 days compared to 2.4 days). The data analysis shows
that the average costs of cases reporting percutaneous or percutaneous
endoscopic coronary atherectomy, with or without involving the
insertion of an intraluminal device, are higher than for all cases in
their respective MS-DRG.
We then examined claims data from the September 2024 update of the
FY 2024 MedPAR file for MS-DRGs 323, 324, and 325. Our findings are
shown in the following table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
323............................................................. 4,429 6.0 $39,047
324............................................................. 4,877 2.9 28,809
325............................................................. 646 3.9 29,362
----------------------------------------------------------------------------------------------------------------
In MS-DRG 323, we found a total of 4,429 cases with an average
length of stay of 6.0 days and average costs of $39,047. In MS-DRG 324,
we found a total of 4,877 cases with an average length of stay of 2.9
days and average costs of $28,809. In MS-DRG 325, we found a total of
646 cases with an average length of stay of 3.9 days and average costs
of $29,362.
The average costs of the 3,307 cases reporting percutaneous or
percutaneous endoscopic coronary atherectomy with the insertion of an
intraluminal device in MS-DRG 321 are $7,161 less than the average
costs of all cases in MS-DRG 323 ($39,047-$31,886 = $7,161) and have an
average length of stay that is less than the average length of stay of
all cases in MS-DRG 323 (5.1 days versus 6.0 days). The average costs
of the 3,134 cases reporting percutaneous or percutaneous endoscopic
coronary atherectomy with the insertion of an intraluminal device in
MS-DRG 322 are $7,920 less than the average costs of all cases in MS-
DRG 324 ($28,809-$20,899 = $7,920) and have an average length of stay
that is less than the average length of stay of all cases in MS-DRG 324
(2.5 days versus 2.9 days). The average costs of the 493 cases in MS-
DRG 250 and the 340 cases in MS-DRG 251 reporting percutaneous or
percutaneous endoscopic coronary atherectomy without reporting a
procedure code describing the insertion of an intraluminal device are
$4,223 and $11,241 less than the average costs of all cases in MS-DRG
325 ($29,362-$25,139 = $7,920; $29,362-$18,121 = $11,241),
respectively. These 493 cases in MS-DRG 250 have an average length of
stay that is more than the average length of stay of all cases in MS-
DRG 325 (4.6 days versus 3.9 days) while the 340 cases in MS-DRG 251
have an average length of stay that is less than the average length of
stay of all cases in MS-DRG 325 (2.5 days versus 3.9 days).
Upon analysis of the claims data and our review of the request, we
do not agree with reassigning cases reporting percutaneous or
percutaneous endoscopic coronary atherectomy from MS-DRGs 250, 251,
321, and 322 to MS-DRGs 323, 324, and 325. While we agree that the
performance of percutaneous or percutaneous endoscopic coronary
atherectomy contributes to increased resource consumption for these PCI
procedures, as previously noted, the data do not support that cases
reporting percutaneous or percutaneous endoscopic coronary atherectomy,
with or without involving the insertion of an intraluminal device,
utilize similar resources when compared to coronary IVL procedures
currently assigned to MS-DRGs 323, 324, and 325. Additionally, as
stated previously and in prior rule making (88 FR 58708), coronary
atherectomy is distinct from coronary lithotripsy in that each of these
procedures are defined by clinically distinct definitions and
objectives. We continue to believe that the root operation Extirpation
is not the same as the root operation Fragmentation and do not warrant
similar MS-DRG assignment (85 FR 58572 through 58573).
We then explored alternative options, as was requested. As
discussed in prior rulemaking (88 FR 58706), we continue to agree that
clinically, the presence of severe calcification can increase the
treatment difficulty and complexity of service. The data analysis
clearly shows that cases reporting percutaneous or percutaneous
endoscopic coronary atherectomy, with or without involving the
insertion of an intraluminal device, have higher average costs and
longer lengths of stay compared to all the cases in their assigned MS-
DRG. For these reasons, we are proposing to create new MS-DRGs for
cases reporting procedure codes describing percutaneous or percutaneous
endoscopic coronary atherectomy involving the insertion of an
intraluminal device, as well as a new MS-DRG for cases reporting
procedure codes describing percutaneous or percutaneous endoscopic
coronary atherectomy without the insertion of an intraluminal device to
address the differential in resource consumption.
To compare and analyze the impact of our suggested modifications,
we ran a simulation using the most recent claims data from the
September 2024 update of the FY 2024 MedPAR file. The following table
illustrates our findings for all 6,441 cases reporting procedure codes
describing percutaneous or percutaneous endoscopic atherectomy
involving the insertion of an intraluminal device.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
Proposed new MS-DRG XXX Percutaneous Coronary Atherectomy with 6,441 3.8 $26,535
Intraluminal Device............................................
----------------------------------------------------------------------------------------------------------------
We applied the criteria to create subgroups in a base MS-DRG as
discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/
LTCH PPS proposed rule. As shown, a three-way split of the proposed new
MS-DRG failed to meet the criterion that there be at least a 20%
difference in average costs between the CC and NonCC subgroup.
[[Page 18041]]
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 3,307 5.1 $31,886
With CC......................................................... 1,861 2.8 21,961
Without CC/MCC.................................................. 1,273 2 19,322
----------------------------------------------------------------------------------------------------------------
As discussed in section II.C.1.b. of the preamble of this FY 2026
IPPS/LTCH PPS proposed rule, if the criteria for a three-way split
fail, the next step is to determine if the criteria are satisfied for a
two-way split. We therefore applied the criteria for a two-way split
for the ``with MCC'' and ``without MCC'' subgroups and found that all
five criteria were met. The following table illustrates our findings.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 3,307 5.1 $31,886
Without MCC..................................................... 3,134 2.5 20,889
----------------------------------------------------------------------------------------------------------------
For the proposed new MS-DRGs for cases reporting procedure codes
describing percutaneous or percutaneous endoscopic atherectomy
involving the insertion of an intraluminal device, there is at least
(1) 500 cases in the MCC subgroup and 500 cases in the without MCC
subgroup; (2) 5 percent of the cases in the MCC group and 5 percent in
the without MCC subgroup; (3) a 20 percent difference in average costs
between the MCC group and the without MCC group; (4) a $2,000
difference in average costs between the MCC group and the without MCC
group; and (5) a 3-percent reduction in cost variance, indicating that
the proposed severity level splits increase the explanatory power of
the base MS-DRG in capturing differences in expected cost between the
proposed MS-DRG severity level splits by at least 3 percent and thus
improve the overall accuracy of the IPPS payment system.
We then ran a simulation using the most recent claims data from the
September 2024 update of the FY 2024 MedPAR file for all 833 cases
reporting procedure codes describing percutaneous or percutaneous
endoscopic atherectomy without the insertion of an intraluminal device.
The following table illustrates our findings.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
Proposed new MS-DRG XXX Percutaneous Coronary Atherectomy 833 3.7 $22,275
without Intraluminal Device....................................
----------------------------------------------------------------------------------------------------------------
We applied the criteria to create subgroups in a base MS-DRG as
discussed in section II.C.1.b. of the preamble of this FY 2026 IPPS/
LTCH PPS proposed rule. As shown, a three-way split of the proposed new
MS-DRG failed to meet the criterion that there be at least 500 cases in
the MCC subgroup, CC subgroup, and NonCC subgroup.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 493 4.6 $25,139
With CC......................................................... 257 2.7 19,080
Without CC/MCC.................................................. 83 2 15,151
----------------------------------------------------------------------------------------------------------------
As discussed in section II.C.1.b. of the preamble of this FY 2026
IPPS/LTCH PPS proposed rule, if the criteria for a three-way split
fail, the next step is to determine if the criteria are satisfied for a
two-way split. We therefore applied the criteria for a two-way split
for the ``with MCC'' and ``without MCC'' subgroups. We note that, as
shown in the table that follows, a two-way split of this base MS-DRG
failed to meet the criterion that there be at least 500 cases in the
with MCC and the without MCC subgroups.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 493 4.6 $25,139
Without MCC..................................................... 340 2.5 18,121
----------------------------------------------------------------------------------------------------------------
We then applied the criteria for a two-way split for the ``with CC/
MCC'' and ``without CC/MCC'' subgroups. As shown in the table that
follows, a two-way split of this base MS-DRG also failed to meet the
criterion that there be
[[Page 18042]]
at least 500 cases in the without CC/MCC subgroup.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With CC/MCC..................................................... 750 3.9 $23,063
Without CC/MCC.................................................. 83 2 15,151
----------------------------------------------------------------------------------------------------------------
We note that because the criteria for both of the two-way splits
failed, a split (or CC subgroup) is not warranted for the proposed new
base MS-DRG. As a result, for FY 2026, we are proposing to create a
base MS-DRG for cases reporting procedure codes describing percutaneous
or percutaneous endoscopic atherectomy without the insertion of an
intraluminal device.
In summary, for FY 2026, taking into consideration that it
clinically requires greater resources to perform percutaneous or
percutaneous endoscopic coronary atherectomy, we are proposing to
create two new MS-DRGs with a two-way severity level split for cases
describing percutaneous or percutaneous endoscopic coronary atherectomy
involving the insertion of an intraluminal device in MDC 05. We are
also proposing to create a new base MS-DRG for cases describing
percutaneous or percutaneous endoscopic coronary atherectomy without an
intraluminal device. These proposed new MS-DRGs are proposed new MS-DRG
359 (Percutaneous Coronary Atherectomy with Intraluminal Device with
MCC), proposed new MS-DRG 360 (Percutaneous Coronary Atherectomy with
Intraluminal Device without MCC) and proposed new MS-DRG 318
(Percutaneous Coronary Atherectomy without Intraluminal Device). We
refer the reader to Table 6P.4a and Table 6P.4b associated with this FY
2026 IPPS/LTCH PPS proposed rule (which is available on the CMS website
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) for the list of procedure codes we are
proposing to define in the logic for each of the proposed new MS-DRGs.
We note that discussion of the surgical hierarchy for the proposed
modification is discussed in section II.C.10. of the preamble of this
FY 2026 IPPS/LTCH PPS proposed rule.
e. Complex Aortic Arch Procedures
For this FY 2026 IPPS/LTCH PPS proposed rule, we received two
separate but related requests to review and reconsider the MS-DRG
assignments for a subset of codes describing aortic arch procedures
assigned to MS DRGs 216, 217, 218, 219, 220, and 221 (Cardiac Valve &
Other Major Cardiothoracic Procedure with and without Cardiac
Catheterization, with MCC, with CC, without CC/MCC, respectively). In
this section of the preamble of this FY 2026 IPPS/LTCH PPS proposed
rule, we discuss each of these separate, but related requests.
The first request was to reassign cases reporting a procedure code
describing endovascular restriction of the thoracic aorta with a
branched or fenestrated intraluminal device from MS-DRGs 219, 220, and
221 (Cardiac Valve and Other Major Cardiothoracic Procedures without
Cardiac Catheterization with MCC, with CC, and without CC/MCC,
respectively) to MS-DRG 216 (Cardiac Valve and Other Major
Cardiothoracic Procedures with Cardiac Catheterization with MCC).
Alternatively, the requestor stated CMS could consider reassigning
other similar complex aortic arch branch procedures to MS-DRG 216. The
requestor suggested that if finalized, the title for MS-DRG 216 should
be revised to reflect ``Cardiac Valve and Other Major Cardiothoracic
Procedures with Cardiac Catheterization with MCC or with Aortic Arch
Branch Intraluminal Device.''
According to the requestor, the manufacturer of the GORE[supreg]
TAG[supreg] Thoracic Branch Endoprosthesis (TBE), reassignment of the
procedure code describing endovascular restriction of the thoracic
aorta with a branched or fenestrated intraluminal device to MS-DRG 216
would result in higher payment and better account for the differences
in resource use of the cases reporting this procedure than other cases
in their respective MS-DRGs where they are currently assigned. The
GORE[supreg] TAG[supreg] TBE provides endovascular repair of
pathologies of the descending thoracic aorta requiring a proximal
landing zone including the left subclavian artery. It is a modular
device that consists of three implantable fabric tubes supported by a
nitinol framework. The GORE[supreg] TAG[supreg] TBE is indicated for
endovascular repair of lesions such as aortic aneurysms, traumatic
transections, and dissections of the descending thoracic aorta with
treatment extending to the aortic arch, while maintaining flow into the
left subclavian artery (Zone 2 of the aortic arch), in patients who are
at high risk for debranching subclavian procedures and who have
appropriate anatomy. According to the requestor, patients with lesions
in the aortic arch are often more clinically complex and more difficult
to treat than patients with lesions in lower parts of the aorta due to
vascular tortuosity, proximity to the heart, involvement of arch
vessels that feed into the head and brain, and risk of stroke and
paraplegia or paraparesis from emboli released into arteries that
provide blood flow to the left arm and head. The requestor stated that
for lesions involving the left subclavian artery, the only other
treatment options available today include open surgical repair with a
synthetic graft or a hybrid procedure which includes a non-branched
endovascular device and an open surgical bypass procedure of the head
vessels. Per the requestor, for arch lesions involving the
brachiocephalic and left common carotid arteries, a TBE device enables
hybrid treatment with one fewer bypass procedure.
The requestor identified cases reporting endovascular restriction
of the thoracic aorta with a branched or fenestrated intraluminal
device by the presence of ICD-10-PCS codes 02VX3EZ (Restriction of
thoracic aorta, ascending/arch with branched or fenestrated
intraluminal device, one or two arteries, percutaneous approach) and
02VW3DZ (Restriction of thoracic aorta, descending with intraluminal
device, percutaneous approach) on the same claim and performed its own
analysis of the claims data. The requestor stated they found 90 cases
reporting endovascular restriction of the thoracic aorta with a
branched or fenestrated intraluminal device, and these cases are 49%
(+$32,326), 60% (+$27,727), and 38% (+$15,432) more costly compared to
all cases in MS-DRGs 219, 220, and 221, respectively. While
acknowledging that cases reporting endovascular restriction of the
thoracic aorta with a branched or fenestrated intraluminal device
typically do not require a cardiac catheterization procedure, the
requestor asserted that this claims analysis
[[Page 18043]]
demonstrates cases reporting endovascular restriction of the thoracic
aorta with a branched or fenestrated intraluminal device require
resources similar to cases in MS-DRG 216.
As mentioned previously, the requestor stated we could also
consider reassigning cases reporting procedure codes describing other
complex aortic arch branch procedures to MS-DRG 216. The requestor
stated to be considered a similar ``complex aortic arch procedure'' the
case should report an ICD-10-PCS code describing the endovascular
restriction of the thoracic aorta with a branched or fenestrated
intraluminal device with an ICD-10-PCS code describing a Zone 0 or a
Zone 1 Bypass procedure. Zone 0 is in the ascending aorta, proximal to
the brachiocephalic artery and Zone 1 covers the portion of the aortic
arch between the brachiocephalic artery and the left common carotid
artery. The requestor identified cases reporting these ``other complex
aortic arch procedures'' as cases reporting ICD-10-PCS codes as
reflected in the following table.
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
02VX3EZ........................... Restriction of thoracic aorta,
ascending/arch with branched or
fenestrated intraluminal device,
one or two arteries, percutaneous
approach.
with one of the following:
031409J....................... Bypass left subclavian artery to
right extracranial artery with
autologous venous tissue, open
approach.
031409K....................... Bypass left subclavian artery to
left extracranial artery with
autologous venous tissue, open
approach.
03140AJ....................... Bypass left subclavian artery to
right extracranial artery with
autologous arterial tissue, open
approach.
03140AK....................... Bypass left subclavian artery to
left extracranial artery with
autologous arterial tissue, open
approach.
03140JJ....................... Bypass left subclavian artery to
right extracranial artery with
synthetic substitute, open
approach.
03140JK....................... Bypass left subclavian artery to
left extracranial artery with
synthetic substitute, open
approach.
03140KJ....................... Bypass left subclavian artery to
right extracranial artery with
nonautologous tissue substitute,
open approach.
03140KK....................... Bypass left subclavian artery to
left extracranial artery with
nonautologous tissue substitute,
open approach.
03140ZJ....................... Bypass left subclavian artery to
right extracranial artery, open
approach.
03140ZK....................... Bypass left subclavian artery to
left extracranial artery, open
approach.
03LJ0CZ....................... Occlusion of left common carotid
artery with extraluminal device,
open approach.
03LJ0ZZ....................... Occlusion of left common carotid
artery, open approach.
03LJ3BZ....................... Occlusion of left common carotid
artery with bioactive intraluminal
device, percutaneous approach.
03LJ3DZ....................... Occlusion of left common carotid
artery with intraluminal device,
percutaneous approach.
03LJ4CZ....................... Occlusion of left common carotid
artery with extraluminal device,
percutaneous endoscopic approach.
03LJ4ZZ....................... Occlusion of left common carotid
artery, percutaneous endoscopic
approach.
031J09J....................... Bypass left common carotid artery to
right extracranial artery with
autologous venous tissue, open
approach.
031J09K....................... Bypass left common carotid artery to
left extracranial artery with
autologous venous tissue, open
approach.
031J09Y....................... Bypass left common carotid artery to
upper artery with autologous venous
tissue, open approach.
031J0AJ....................... Bypass left common carotid artery to
right extracranial artery with
autologous arterial tissue, open
approach.
031J0AK....................... Bypass left common carotid artery to
left extracranial artery with
autologous arterial tissue, open
approach.
031J0AY....................... Bypass left common carotid artery to
upper artery with autologous
arterial tissue, open approach.
031J0JJ....................... Bypass left common carotid artery to
right extracranial artery with
synthetic substitute, open
approach.
031J0JK....................... Bypass left common carotid artery to
left extracranial artery with
synthetic substitute, open
approach.
031J0JY....................... Bypass left common carotid artery to
upper artery with synthetic
substitute, open approach.
031J0KJ....................... Bypass left common carotid artery to
right extracranial artery with
nonautologous tissue substitute,
open approach.
031J0KK....................... Bypass left common carotid artery to
left extracranial artery with
nonautologous tissue substitute,
open approach.
031J0KY....................... Bypass left common carotid artery to
upper artery with nonautologous
tissue substitute, open approach.
031J0ZJ....................... Bypass left common carotid artery to
right extracranial artery, open
approach.
031J0ZK....................... Bypass left common carotid artery to
left extracranial artery, open
approach.
031J0ZY....................... Bypass left common carotid artery to
upper artery, open approach.
------------------------------------------------------------------------
In analyzing this request, we note the requestor is correct that
the following ICD-10-PCS codes specifically describe procedures
involving the GORE[supreg] TAG[supreg] TBE: 02VX3EZ (Restriction of
thoracic aorta, ascending/arch with branched or fenestrated
intraluminal device, one or two arteries, percutaneous approach), in
combination with 02VW3DZ (Restriction of thoracic aorta, descending
with intraluminal device, percutaneous approach). The requestor is also
correct that procedure codes 02VX3EZ and 02VW3DZ are assigned to MS-
DRGs 216, 217, 218, 219, 220, and 221. Additionally, we agree that the
ICD-10-PCS codes as reflected in the previous table can describe other
complex aortic arch procedures, and when reported MS-DRGs 216, 217,
218, 219, 220, and 221 would be assigned. We refer the reader to the
ICD-10 MS-DRG Definitions Manual Version 42.1, which is available on
the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for complete documentation of the GROUPER logic for MS-DRGs
216, 217, 218, 219, 220, and 221. We note that the GORE[supreg]
TAG[supreg] TBE was approved for new technology add-on payments for FY
2023 (87 FR 48966 through 48969) FY 2024 (88 FR 58800), and FY 2025 (89
FR 69124). We refer readers to section II.E.5 of the preamble of this
FY 2026 IPPS/LTCH PPS proposed rule for a discussion regarding the
proposed FY 2026 status of technologies approved for FY 2025 new
technology add-on payments, including the GORE[supreg] TAG[supreg] TBE.
To explore mechanisms to address this request and to understand the
resource use for the subset of cases reporting procedure codes 02VX3EZ
and 02VW3DZ, and cases reporting
[[Page 18044]]
``other complex aortic arch procedures'', we began our analysis by
examining claims data from the September 2024 update of the FY 2024
MedPAR file for cases assigned to MS-DRGs 216, 217, 218, 219, 220, and
221. Our findings are shown in the following table:
MS-DRGs 216-221--Cases Reporting Endovascular Restriction of the Thoracic Aorta With a Branched or Fenestrated
Intraluminal Device and Cases Reporting Other Complex Aortic Arch Procedures
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
216............................ All cases...................... 5,137 13.6 $88,193
Cases reporting 02VX3EZ and 4 25.3 156,361
02VW3DZ.
Cases reporting other complex 0 0 0
aortic arch procedures.
217............................ All cases...................... 1,571 6.8 59,943
Cases with 02VX3EZ and 02VW3DZ. 1 2 46,235
Cases reporting other complex 0 0 0
aortic arch procedures.
218............................ All cases...................... 251 2.9 61,733
Cases with 02VX3EZ and 02VW3DZ. 0 0 0
Cases reporting other complex 0 0 0
aortic arch procedures.
219............................ All cases...................... 13,222 10 69,728
Cases with 02VX3EZ and 02VW3DZ. 81 11.4 97,336
Cases reporting other complex 10 20.7 112,213
aortic arch procedures.
220............................ All cases...................... 9,636 6.2 49,514
Cases with 02VX3EZ and 02VW3DZ. 64 5.2 76,700
Cases reporting other complex 10 6.9 87,003
aortic arch procedures.
221............................ All cases...................... 1,146 3.6 46,900
Cases with 02VX3EZ and 02VW3DZ. 32 1.9 56,765
Cases reporting other complex 0 0 0
aortic arch procedures.
----------------------------------------------------------------------------------------------------------------
As shown in the table, the data analysis performed indicates that
the 4 cases in MS-DRG 216 reporting procedure codes 02VX3EZ and 02VW3DZ
have an average length of stay that is longer than the average length
of stay for all the cases in MS-DRG 216 (25.3 days versus 13.6 days)
and higher average costs when compared to all the cases in MS-DRG 216
($156,361 versus $88,193). The difference in average costs is $68,168
($156,361-$88,193 = $68,168) for the cases reporting procedure codes
02VX3EZ and 02VW3DZ in MS-DRG 216 when compared to all the cases in MS-
DRG 216. There were zero cases reporting other complex aortic arch
procedures in MS-DRG 216. In MS-DRG 217, the one case reporting
procedure codes 02VX3EZ and 02VW3DZ has a length of stay that is
shorter than the average length of stay for all the cases in MS-DRG 217
(2 days versus 6.8 days) and lower costs when compared to all the cases
in MS-DRG 217 ($46,235 versus $59,943). The difference in average costs
is $13,708 ($59,943-$46,235 = $13,708) for the cases reporting
procedure codes 02VX3EZ and 02VW3DZ in MS-DRG 217 when compared to all
the cases in MS-DRG 217. There were zero cases reporting other complex
aortic arch procedures in MS-DRG 217. In MS-DRG 218, there were zero
cases reporting procedure codes 02VX3EZ and 02VW3DZ or other complex
aortic arch procedures.
The 81 cases in MS-DRG 219 reporting procedure codes 02VX3EZ and
02VW3DZ have an average length of stay that is longer than the average
length of stay for all the cases in MS-DRG 219 (11.4 days versus 10
days) and higher average costs when compared to all the cases in MS-DRG
219 ($97,336 versus $69,728). The difference in average costs is
$27,608 ($97,336-$69,728 = $27,608) for the cases reporting procedure
codes 02VX3EZ and 02VW3DZ in MS-DRG 219 when compared to all the cases
in MS-DRG 219. The 10 cases in MS-DRG 219 reporting procedure codes
describing other complex arch procedures have an average length of stay
that is longer than the average length of stay for all the cases in MS-
DRG 219 (20.7 days versus 10 days) and higher average costs when
compared to all the cases in MS-DRG 219 ($112,213 versus $69,728). The
difference in average costs is $42,485 ($112,213-$69,728 = $42,485) for
the cases reporting procedure codes describing other complex arch
procedures in MS-DRG 219 when compared to all the cases in MS-DRG 219.
In MS-DRG 220, the 64 cases reporting procedure codes 02VX3EZ and
02VW3DZ have an average length of stay that is shorter than the average
length of stay for all the cases in MS-DRG 220 (5.2 days versus 6.2
days) and higher average costs when compared to all the cases in MS-DRG
220 ($76,700 versus $49,514). The difference in average costs is
$27,186 ($76,700-$49,514 = $27,186) for the cases reporting procedure
codes 02VX3EZ and 02VW3DZ in MS-DRG 220 when compared to all the cases
in MS-DRG 220. The 10 cases reporting procedure codes describing other
complex arch procedures have an average length of stay that is longer
than the average length of stay for all the cases in MS-DRG 220 (6.9
days versus 6.2 days) and higher average costs when compared to all the
cases in MS-DRG 220 ($87,003 versus $49,514). The difference in average
costs is $37,489 ($87,003-$49,514 = $37,489) for the cases reporting
procedure codes describing other complex arch procedures in MS-DRG 220
when compared to all the cases in MS-DRG 220.
In MS-DRG 221, the 32 cases reporting procedure codes 02VX3EZ and
02VW3DZ have an average length of stay that is shorter than the average
length of stay for all the cases in MS-DRG 221 (1.9 days versus 3.6
days) and higher average costs when compared to all the cases in MS-DRG
221 ($56,765 versus $46,900). The difference in average costs is $9,865
($56,765-$46,900 = $9,865) for the cases reporting procedure codes
02VX3EZ and 02VW3DZ in MS-DRG 221 when compared to all the cases in MS-
DRG 221. There were zero cases reporting other complex aortic arch
procedures in MS-DRG 221.
[[Page 18045]]
Our analysis of the claims data for cases reporting procedure codes
02VX3EZ and 02VW3DZ and cases reporting procedure codes describing
other complex arch procedures demonstrated a relatively low volume of
cases in comparison to all the cases in their respective MS-DRGs (that
is, in 216, 217, 218, 219, 220, and 221). Analysis of the claims data
also demonstrates that the cases had an average length of stay
generally longer than all the cases in their respective MS-DRGs. The
data analysis indicates that the average costs of the 182 cases
reporting procedure codes 02VX3EZ and 02VW3DZ and the 20 cases
reporting procedure codes describing other complex arch procedures are
generally higher when compared to the average costs of all cases in MS-
DRGs 216, 217, 218, 219, 220, and 221. Specifically, most of these
cases have average costs that are considerably higher than the average
costs of all cases in MS-DRG 216. We reviewed these data and do not
believe that proposing to reassign the cases reporting procedure codes
02VX3EZ and 02VW3DZ and the cases reporting procedure codes describing
other complex arch procedures to MS-DRG 216, even if there is no
cardiac catheterization procedure reported and no secondary diagnosis
designated as an MCC reported, would fully address the difference in
resource utilization in these cases. Accordingly, we do not believe the
data adequately support a potential reassignment of these cases to MS-
DRG 216. Therefore we decided to further explore alternative options to
ensure clinical coherence between these cases and the other cases with
which they may potentially be grouped in conjunction with the separate
but related request we received to review and reconsider the MS-DRG
assignments for another subset of codes describing aortic arch
procedures, as discussed later in this section.
The second request we received was to reassign cases reporting
thoracic aortic arch replacement combined with restriction of the
descending thoracic aorta from MS-DRGs 219, 220, and 221 (Cardiac Valve
and Other Major Cardiothoracic Procedures without Cardiac
Catheterization with MCC, with CC, and without CC/MCC, respectively) to
MS-DRGs 216, 217, and 218 (Cardiac Valve and Other Major Cardiothoracic
Procedures with Cardiac Catheterization with MCC, with CC, and without
CC/MCC, respectively).
The requestor, the manufacturer of the ThoraflexTM
Hybrid device (also known as the Terumo Aortic Hybrid device), stated
that hospital resource utilization for cases involving the
ThoraflexTM Hybrid device is significantly higher compared
to all cases in MS-DRGs 216, 217, 218, 219, 220, and 221, creating
substantial financial loss for the hospitals that offer this
technology. The ThoraflexTM Hybrid device is a dual-purpose
medical device that replaces the ascending aorta and aortic arch while
also stabilizing and repairing the descending thoracic aorta in a
single procedure. It is indicated for the open surgical repair or
replacement of damaged or diseased vessels of the aortic arch and
descending aorta with or without involvement of the ascending aorta in
cases of aneurysm and/or dissection. According to the requestor, when
the ThoraflexTM Hybrid device is implanted within the aorta,
it creates a channel for the blood to bypass the damaged or diseased
part of the vessel and keep flowing as the graft and stented sections
of the implant replace the parts of the aorta that are not working
properly.
The requestor stated that aortic pathologies such as aneurysms and
dissections that involve the aortic arch and descending thoracic aorta
continue to present surgical challenges and carry risks such as stroke,
cerebral malperfusion, paralysis, and renal malperfusion. These risks
must be mitigated by intense and patient specific goal-oriented care.
According to the requestor, hospitals treating aortic arch pathologies
must be able to deploy rapid neurology, neurosurgery, and nephrology
all within hours to ensure a good patient outcome. According to the
requestor, all these attributes attest to the difficulty and complexity
of thoracic aortic arch replacement combined with restriction of the
descending thoracic aorta and care of the patient.
The requestor identified cases reporting thoracic aortic arch
replacement combined with restriction of the descending thoracic aorta
by the presence of ICD-10-PCS code X2RX0N7 (Replacement of thoracic
aorta, arch using branched synthetic substitute with intraluminal
device, open approach, new technology group 7) in combination with
X2VW0N7 (Restriction of thoracic aorta, descending using branched
synthetic substitute with intraluminal device, open approach, new
technology group 7) on the same claim and performed its own analysis of
the claims data. The requestor stated they found that while the volume
of cases reporting thoracic aortic arch replacement combined with
restriction of the descending thoracic aorta is <1% of total volume in
MS-DRGs 216, 217, 218, 219, 220, and 221, the average costs and average
lengths of stay of these cases are significantly greater than all other
cases in MS-DRG 216.
In analyzing this request, we note the requestor is correct that
the following ICD-10-PCS codes specifically describe procedures
involving the ThoraflexTM Hybrid device: X2RX0N7
(Replacement of thoracic aorta arch with branched synthetic substitute
with intraluminal device, new technology group 7) in combination with
X2VW0N7 (Restriction of thoracic descending aorta with branched
synthetic substitute with intraluminal device, new technology group 7).
The requestor is also correct that procedure codes X2RX0N7 and X2VW0N7
are assigned to MS-DRGs 216, 217, 218, 219, 220, and 221. We refer the
reader to the ICD-10 MS-DRG Definitions Manual Version 42.1, which is
available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software, for complete documentation of the GROUPER logic for MS-
DRGs 216, 217, 218, 219, 220, and 221. The ThoraflexTM
Hybrid device was approved for new technology add-on payments for FY
2023 (87 FR 48974 through 48976), FY 2024 (88 FR 58800), and FY 2025
(89 FR 69124). We refer readers to section II.E.5 of the preamble of
this FY 2026 IPPS/LTCH PPS proposed rule for a discussion regarding the
proposed FY 2026 status of technologies approved for FY 2025 new
technology add-on payments, including the ThoraflexTM Hybrid
device.
To explore mechanisms to address this request and to understand the
resource use for the subset of cases reporting procedure codes X2RX0N7
and X2VW0N7, we began our analysis by examining claims data from the
September 2024 update of the FY 2024 MedPAR file for cases reporting
the procedure code combination describing thoracic aortic arch
replacement combined with restriction of the descending thoracic aorta
assigned to MS-DRGs 216, 217, 218, 219, 220, and 221. Our findings are
shown in the following table:
[[Page 18046]]
MS-DRGs 216-221--Cases Reporting Thoracic Aortic Arch Replacement Combined With Restriction of the Descending
Thoracic Aorta
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
216............................ All cases...................... 5,137 13.6 $88,193
Cases reporting X2RX0N7 and 20 23 158,920
X2VW0N7.
217............................ All cases...................... 1,571 6.8 59,943
Cases reporting X2RX0N7 and 2 21.5 160,014
X2VW0N7.
218............................ All cases...................... 251 2.9 61,733
Cases reporting X2RX0N7 and 0 0 0
X2VW0N7.
219............................ All cases...................... 13,222 10 69,728
Cases reporting X2RX0N7 and 61 16.9 154,134
X2VW0N7.
220............................ All cases...................... 9,636 6.2 49,514
Cases reporting X2RX0N7 and 14 8.9 84,004
X2VW0N7.
221............................ All cases...................... 1,146 3.6 46,900
Cases reporting X2RX0N7 and 1 3 97,825
X2VW0N7.
----------------------------------------------------------------------------------------------------------------
As shown in the table, the data analysis performed indicates that
the 20 cases in MS-DRG 216 reporting procedure codes X2RX0N7 and
X2VW0N7 have an average length of stay that is longer than the average
length of stay for all the cases in MS-DRG 216 (23 days versus 13.6
days) and higher average costs when compared to all the cases in MS-DRG
216 ($158,920 versus $88,193). The difference in average costs is
$70,727 ($158,920-$88,193 = $70,727) for the cases reporting procedure
codes X2RX0N7 and X2VW0N7 in MS-DRG 216 when compared to all the cases
in MS-DRG 216. In MS-DRG 217, the 2 cases reporting procedure codes
X2RX0N7 and X2VW0N7 have an average length of stay that is longer than
the average length of stay for all the cases in MS-DRG 217 (21.5 days
versus 6.8 days) and higher average costs when compared to all the
cases in MS-DRG 217 ($160,014 versus $59,943). The difference in
average costs is $100,071 ($160,014-$59,943 = $100,071) for the cases
reporting procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 217 when
compared to all the cases in MS-DRG 217. In MS-DRG 218, there were zero
cases reporting procedure codes X2RX0N7 and X2VW0N7.
The 61 cases in MS-DRG 219 reporting procedure codes X2RX0N7 and
X2VW0N7 have an average length of stay that is longer than the average
length of stay for all the cases in MS-DRG 219 (16.9 days versus 10
days) and higher average costs when compared to all the cases in MS-DRG
219 ($154,134 versus $69,728). The difference in average costs is
$84,406 ($154,134-$69,728 = $84,406) for the cases reporting procedure
codes X2RX0N7 and X2VW0N7 in MS-DRG 219 when compared to all the cases
in MS-DRG 219. In MS-DRG 220, the 14 cases reporting procedure codes
X2RX0N7 and X2VW0N7 have an average length of stay that is longer than
the average length of stay for all the cases in MS-DRG 220 (8.9 days
versus 6.2 days) and higher average costs when compared to all the
cases in MS-DRG 220 ($84,004 versus $49,514). The difference in average
costs is $34,490 ($84,004-$49,514 = $34,490) for the cases reporting
procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 220 when compared to all
the cases in MS-DRG 220. In MS-DRG 221, the one case reporting
procedure codes X2RX0N7 and X2VW0N7 has a length of stay that is
shorter than the average length of stay for all the cases in MS-DRG 221
(3 days versus 3.6 days) and higher average costs when compared to all
the cases in MS-DRG 221 ($97,825 versus $46,900). The difference in
average costs is $50,925 ($97,825-$46,900 = $50,925) for the cases
reporting procedure codes X2RX0N7 and X2VW0N7 in MS-DRG 221 when
compared to all the cases in MS-DRG 221.
We reviewed these data and note the average costs of the 98 cases
reporting the procedure code combination describing thoracic aortic
arch replacement combined with restriction of the descending thoracic
aorta are higher when compared to the average costs of all cases in MS-
DRGs 216, 217, 218, 219, 220, and 221. The difference in average costs
of the 98 cases reporting the procedure code combination describing
thoracic aortic arch replacement combined with restriction of the
descending thoracic aorta is $56,445 ($144,638-$88,193 = $56,445) for
the cases reporting procedure codes X2RX0N7 and X2VW0N7 when compared
to all the cases in MS-DRG 216, which is the highest severity level
``with MCC'' MS-DRG. We reviewed these data and do not believe that
proposing to reassign all cases reporting the procedure code
combination describing thoracic aortic arch replacement combined with
restriction of the descending thoracic aorta to MS-DRGs 216, 217, and
218, even if there is no cardiac catheterization procedure reported and
no secondary diagnosis designated as an MCC reported, would fully
address the difference in resource utilization in these cases as the
average costs of the cases reporting procedure codes X2RX0N7 and
X2VW0N7 are much higher when compared to all the cases in MS-DRG 216.
Accordingly, we do not believe the data adequately support a potential
reassignment of these cases to MS-DRGs 216, 217, and 218, respectively.
We also do not believe that the small subset cases that report the
procedure code combination describing thoracic aortic arch replacement
combined with restriction of the descending thoracic aorta warrants the
creation of a new MS-DRG at this time. As stated in prior rulemaking,
the MS-DRGs are a classification system intended to group together
diagnoses and procedures with similar clinical characteristics and
utilization of resources. We generally seek to identify sufficiently
large sets of claims data with a resource/cost similarity and clinical
similarity in developing diagnosis related groups rather than smaller
subsets. Moreover, as stated in prior rulemaking (85 FR 58472), we have
concerns regarding making proposed MS-DRG changes based on a specific,
single technology (the ThoraflexTM Hybrid device) identified
by only one unique procedure code combination versus considering
proposed changes based on a group of related procedure codes that can
be reported to describe the same type or class of technology, which is
more consistent with the intent of the MS-DRGs.
[[Page 18047]]
To explore other mechanisms to address this request, we then
reexamined the separate but related request discussed previously to
reassign cases reporting procedure codes describing endovascular
restriction of the thoracic aorta with a branched or fenestrated
intraluminal device and cases reporting other complex aortic arch
procedures. In examining these requests, we note that the first
requestor suggested that CMS reassign cases reporting procedure codes
describing endovascular restriction of the thoracic aorta with a
branched or fenestrated intraluminal device from MS-DRGs 219, 220, and
221 to MS-DRG 216 and the second requestor suggested that CMS reassign
cases reporting the procedure code combination describing thoracic
aortic arch replacement combined with restriction of the descending
thoracic aorta without a procedure code describing the performance of a
cardiac catheterization from MS-DRGs 219, 220, and 221 to MS-DRGs 216,
217, and 218 for FY 2026. As discussed in prior rulemaking (86 FR
44830, 87 FR 48847, and 88 FR 58683), MS-DRGs 216, 217, and 218 are
defined by the performance of cardiac catheterization. We are concerned
about the effect on clinical coherence of assigning cases that do not
also have a cardiac catheterization procedure reported to MS-DRGs that
are defined by the performance of that procedure.
However, we do note that in our examination of both requests, the
data analysis indicates that the average costs of these complex aortic
arch procedures, such as the cases reporting procedure codes describing
endovascular restriction of the thoracic aorta with a branched or
fenestrated intraluminal device, the cases reporting the procedure code
combination describing thoracic aortic arch replacement combined with
restriction of the descending thoracic aorta, and the cases reporting
other complex aortic arch procedures, are higher when compared to the
average costs of all cases in MS-DRGs 216, 217, 218, 219, 220, and 221.
Analysis of the claims data also suggests that these cases reporting
complex aortic arch procedures are associated with increased hospital
resource utilization.
We reviewed these data and note, clinically, aortic arch
pathologies are serious clinical conditions associated with an
increased likelihood of death but also the potential for significant
functional limitations. The aortic arch is the segment of the aorta
that helps distribute blood to the head and upper extremities via the
brachiocephalic trunk, the left common carotid, and the left subclavian
artery. The aortic arch also plays a role in blood pressure homeostasis
via baroreceptors found within the walls of the aortic arch that help
prevent quick, drastic changes in blood pressure. Aortic aneurysms and
aortic dissection that involve the aortic arch are associated with
extremely high mortality and morbidity and the data analysis clearly
shows that cases reporting complex aortic arch procedures have higher
average costs and generally longer lengths of stay compared to all the
cases in their assigned MS-DRG.
Therefore, based on our review of the clinical issues and the
claims data, we are proposing to create a new MS-DRG to better
differentiate these complex aortic arch procedures from other cases in
their respective MS-DRGs, based on treatment difficulty, clinical
similarity, and resource use. To compare and analyze the impact of our
suggested modifications, we ran a simulation using the claims data from
the September 2024 update of the FY 2024 MedPAR file.
----------------------------------------------------------------------------------------------------------------
Average length
Proposed new MS-DRG Number of cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
Proposed new MS-DRG XXX Complex Aortic Arch Procedures....... 300 11.2 $104,826
----------------------------------------------------------------------------------------------------------------
For the cases reporting complex aortic arch procedures, we
identified a total of 300 cases using the claims data from the
September 2024 update of the FY 2024 MedPAR file, so the criterion that
there are at least 500 or more cases in each subgroup could not be met.
Therefore, we are not proposing to subdivide the proposed new MS-DRG
for complex aortic arch procedures into severity levels.
In summary, for FY 2026, taking into consideration that it
clinically requires greater resources to perform complex aortic arch
procedures, we are proposing to create a new base MS-DRG for cases
reporting complex aortic arch procedures in MDC 05. The proposed new
MS-DRG is proposed new MS-DRG 209 (Complex Aortic Arch Procedures). We
refer the reader to Table 6P.5a associated with this FY 2026 IPPS/LTCH
PPS proposed rule (which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for the list of
procedure codes we are proposing to define in the logic for the
proposed new MS-DRG. We note that discussion of the surgical hierarchy
for the proposed modification is discussed in section II.C.10. of the
preamble of this FY 2026 IPPS/LTCH PPS proposed rule.
f. Deep Vein Thrombophlebitis
Consistent with our annual review of the MS-DRGs, we consider
changes in resource consumption, treatment patterns, technology, and
any other factors that may change the relative use of hospital
resources. In our review of the claims data from the September 2024
update of the FY 2024 MedPAR file, we identified a low volume of cases
for MS-DRGs 294 and 295 (Deep Vein Thrombophlebitis with CC/MCC and
without CC/MCC, respectively). Our findings are shown in the following
table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
294............................................................. 146 4.1 $10,808
295............................................................. 0 0 0
----------------------------------------------------------------------------------------------------------------
[[Page 18048]]
A deep vein thrombophlebitis (DVT) is a blood clot that forms in
one of the deep veins of the body, most commonly occurring in the veins
of the pelvis, calf, or thigh. The 35 ICD-10-CM diagnosis codes
describing deep vein thrombophlebitis currently assigned to MS-DRGs 294
and 295 are shown in the following table.
Diagnosis Codes Describing Deep Venous Thrombophlebitis (DVT) in MS-DRGS
294-295
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
I80.10............................ Phlebitis and thrombophlebitis of
unspecified femoral vein.
I80.11............................ Phlebitis and thrombophlebitis of
right femoral vein.
I80.12............................ Phlebitis and thrombophlebitis of
left femoral vein.
I80.13............................ Phlebitis and thrombophlebitis of
femoral vein, bilateral.
I80.201........................... Phlebitis and thrombophlebitis of
unspecified deep vessels of right
lower extremity.
I80.202........................... Phlebitis and thrombophlebitis of
unspecified deep vessels of left
lower extremity.
I80.203........................... Phlebitis and thrombophlebitis of
unspecified deep vessels of lower
extremities, bilateral.
I80.209........................... Phlebitis and thrombophlebitis of
unspecified deep vessels of
unspecified lower extremity.
I80.211........................... Phlebitis and thrombophlebitis of
right iliac vein.
I80.212........................... Phlebitis and thrombophlebitis of
left iliac vein.
I80.213........................... Phlebitis and thrombophlebitis of
iliac vein, bilateral.
I80.219........................... Phlebitis and thrombophlebitis of
unspecified iliac vein.
I80.221........................... Phlebitis and thrombophlebitis of
right popliteal vein.
I80.222........................... Phlebitis and thrombophlebitis of
left popliteal vein.
I80.223........................... Phlebitis and thrombophlebitis of
popliteal vein, bilateral.
I80.229........................... Phlebitis and thrombophlebitis of
unspecified popliteal vein.
I80.231........................... Phlebitis and thrombophlebitis of
right tibial vein.
I80.232........................... Phlebitis and thrombophlebitis of
left tibial vein.
I80.233........................... Phlebitis and thrombophlebitis of
tibial vein, bilateral.
I80.239........................... Phlebitis and thrombophlebitis of
unspecified tibial vein.
I80.241........................... Phlebitis and thrombophlebitis of
right peroneal vein.
I80.242........................... Phlebitis and thrombophlebitis of
left peroneal vein.
I80.243........................... Phlebitis and thrombophlebitis of
peroneal vein, bilateral.
I80.249........................... Phlebitis and thrombophlebitis of
unspecified peroneal vein.
I80.251........................... Phlebitis and thrombophlebitis of
right calf muscular vein.
I80.252........................... Phlebitis and thrombophlebitis of
left calf muscular vein.
I80.253........................... Phlebitis and thrombophlebitis of
calf muscular vein, bilateral.
I80.259........................... Phlebitis and thrombophlebitis of
unspecified calf muscular vein.
I80.291........................... Phlebitis and thrombophlebitis of
other deep vessels of right lower
extremity.
I80.292........................... Phlebitis and thrombophlebitis of
other deep vessels of left lower
extremity.
I80.293........................... Phlebitis and thrombophlebitis of
other deep vessels of lower
extremity, bilateral.
I80.299........................... Phlebitis and thrombophlebitis of
other deep vessels of unspecified
lower extremity.
I80.3............................. Phlebitis and thrombophlebitis of
lower extremities, unspecified.
I82.220........................... Acute embolism and thrombosis of
inferior vena cava.
I82.221........................... Chronic embolism and thrombosis of
inferior vena cava.
------------------------------------------------------------------------
In light of the initial findings of only 146 cases for MS-DRG 294
and zero cases in MS-DRG 295, we further reviewed the MedPAR claims
data for cases assigned to MS-DRGs 294 and 295 for the past 5 fiscal
years. As reflected in the following tables, the data indicate that the
number of cases grouping to MS-DRGs 294 and 295 has declined.
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY and MedPAR data reviewed for MS-DRG 294 cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
FY 2022 (FY 2020 MedPAR)........................................ 222 4.3 $8,962
FY 2023 (FY 2021 MedPAR)........................................ 227 4.2 9,325
FY 2024 (FY 2022 MedPAR)........................................ 177 4.8 9,665
FY 2025 (FY 2023 MedPAR)........................................ 178 4.6 10,404
FY 2026 (FY 2024 MedPAR)........................................ 146 4.1 10,808
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Number of Average length
FY and MedPAR data reviewed for MS-DRG 295 cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
FY 2022 (FY 2020 MedPAR)........................................ 20 3.4 $7,323
FY 2023 (FY 2021 MedPAR)........................................ 11 2.5 4,988
FY 2024 (FY 2022 MedPAR)........................................ 0 0 0
FY 2025 (FY 2023 MedPAR)........................................ 0 0 0
FY 2026 (FY 2024 MedPAR)........................................ 0 0 0
----------------------------------------------------------------------------------------------------------------
[[Page 18049]]
We note that, if, during our annual MS-DRG analysis we identify
that there are only a few patients in a respective MS-DRG, consistent
with our established process in deciding whether to propose to make
further modifications, we consider if there have been potential changes
in the clinical characteristics of the patients, treatment patterns, or
resource utilization. A principle of the MS-DRGs and the
characteristics of a meaningful DRG classification scheme is the
ability to detect such changes and accordingly, propose clinically
appropriate modifications that are also consistent with resource
utilization. We have noted in prior rulemaking that we prefer to have a
substantial number of cases in an MS-DRG because having larger clinical
cohesive groups within an MS-DRG provides greater stability for annual
updates to the relative payment weights. In light of these
considerations, and the low volume of cases in MS-DRGs 294 and 295, we
believed it was appropriate to further analyze how to potentially
reclassify these cases.
Accordingly, using the September 2024 update of the FY 2024 MedPAR
file, we examined whether there were other MS-DRGs to which these cases
could appropriately be reassigned. As part of this analysis, we also
reviewed the base DRG by severity claims data for MS-DRG 294 because
the MS-DRG includes cases reporting an MCC as well as cases reporting a
CC. As previously noted, there were zero cases identified in MS-DRG
295, which would only consist of NonCC cases. Therefore, we analyzed
the claims data to determine the number of cases, the average length of
stay, and average costs for the 146 cases in MS-DRG 294 by severity
level (1=MCC and 2=CC). Our findings are shown in the following table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
294-1........................................................... 45 5.4 $14,085
294-2........................................................... 101 3.5 9,348
-----------------------------------------------
294 base DRG total.............................................. 146 4.1 10,808
----------------------------------------------------------------------------------------------------------------
We note that medical MS-DRGs 299, 300, and 301 (Peripheral Vascular
Disorders with MCC, with CC, and without CC/MCC, respectively) also
include diagnoses describing other types of phlebitis and
thrombophlebitis in the logic for case assignment, consistent with the
diagnosis codes in the logic for case assignment to MS-DRGs 294 and
295. As such, we reviewed the claims data from the September 2024
update of the FY 2024 MedPAR file for MS-DRGs 299, 300, and 301 to
examine the resource utilization associated with cases assigned to
these MS-DRGs. Our findings are shown in the following table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
299............................................................. 14,129 5.5 $14,742
300............................................................. 18,038 3.9 9,757
301............................................................. 3,807 2.5 6,723
----------------------------------------------------------------------------------------------------------------
As shown in the data, the 45 cases reporting an MCC in MS-DRG 294
have an average length of stay of 5.4 days with average costs of
$14,085, which is comparable to the cases in MS-DRG 299 reporting an
MCC that have an average length of stay of 5.5 days with average costs
of $14,742. The 101 cases reporting a CC in MS-DRG 294 have an average
length of stay of 3.5 days with average costs of $9,348, which is
comparable to the cases in MS-DRG 300 reporting an CC that have an
average length of stay of 3.9 days with average costs of $9,757.
Based on our analysis and review of the cases grouping to MS-DRGs
294 and 295, we believe it is appropriate to delete these MS-DRGs and
reassign the cases currently assigned to MS-DRGs 294 and 295 to MS-DRGs
299, 300, and 301, which are clinically consistent and also align with
the resource utilization for these cases. Accordingly, for FY 2026, we
are proposing to delete MS-DRGs 294 and 295 and reassign the previously
listed 35 diagnosis codes describing deep vein thrombophlebitis to MS-
DRGs 299, 300, and 301. We refer the reader to the ICD-10 MS-DRG
Version 42.1 Definitions Manual (which is available via the internet on
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software)
for complete documentation of the GROUPER logic for MS-DRGs 299, 300,
and 301.
5. MDC 08 (Diseases and Disorders of the Musculoskeletal System and
Connective Tissue)
a. Hip or Knee Procedures With Periprosthetic Joint Infection
We received a request to reassign cases reporting a hip or knee
procedure with a principal diagnosis of periprosthetic joint infection
(PJI) from the lower severity level ``without CC/MCC'' MS-DRG to the
higher severity level ``with CC'' MS-DRG when there is no major
complication or comorbidity (MCC) or complication or comorbidity (CC)
reported. According to the requestor, PJI is a devastating healthcare
condition that occurs in one percent to two percent (1% to 2%) of
primary joint replacements.\8\ PJI is also the primary cause for
revision arthroplasty in most developed markets. The requestor stated
that patients undergoing revision for PJI experience higher mortality
rates ranging from 0.8 to 4 percent at 1 year and 12.9 to 25.9 percent
at 5 years following revision surgery.
---------------------------------------------------------------------------
\8\ Corvec S, Portillo ME, Pasticci BM, Borens O, Trampuz A.
Epidemiology and new developments in the diagnosis of prosthetic
joint infection. Int J Artif Organs 2012;35:923-934.
---------------------------------------------------------------------------
According to the requestor, management of PJI requires complex
treatment strategies including multiple surgical revisions and long-
term antimicrobial treatment, leading to substantially higher costs
versus aseptic revision arthroplasty. The requestor asserted that when
missed or undertreated, PJI leads to persistence of
[[Page 18050]]
infection and multiple surgical revisions causing poor function or
disability, considerably impairing quality of life.
The requestor stated that current treatment options for PJI include
chronic suppressive antibiotics; debridement, antibiotics, and implant
retention (DAIR); one-stage revision; two-stage revision; and
amputation. According to the requestor, regardless of the treatment
option selected for the knee or hip, the presence of PJI as the
principal diagnosis appears to significantly increase the length of
stay and the resource utilization of these cases in comparison to all
other cases assigned to the respective MS-DRGs.
Using the FY 2023 MedPAR file that informed FY 2025 rulemaking, the
requestor stated it performed its own analysis of cases reporting PJI
as the principal diagnosis. The requestor provided the following list
of ICD-10-CM diagnosis codes it used to identify the presence of a PJI
in the hip or knee joint.
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
T84.51XA.......................... Infection and inflammatory reaction
due to internal right hip
prosthesis, initial encounter.
T84.51XD.......................... Infection and inflammatory reaction
due to internal right hip
prosthesis, subsequent encounter.
T84.51XS.......................... Infection and inflammatory reaction
due to internal right hip
prosthesis, sequela.
T84.52XA.......................... Infection and inflammatory reaction
due to internal left hip
prosthesis, initial encounter.
T84.52XD.......................... Infection and inflammatory reaction
due to internal left hip
prosthesis, subsequent encounter.
T84.52XS.......................... Infection and inflammatory reaction
due to internal left hip
prosthesis, sequela.
T84.53XA.......................... Infection and inflammatory reaction
due to internal right knee
prosthesis, initial encounter.
T84.53XD.......................... Infection and inflammatory reaction
due to internal right knee
prosthesis, subsequent encounter.
T84.53XS.......................... Infection and inflammatory reaction
due to internal right knee
prosthesis, sequela.
T84.54XA.......................... Infection and inflammatory reaction
due to internal left knee
prosthesis, initial encounter.
T84.54XD.......................... Infection and inflammatory reaction
due to internal left knee
prosthesis, subsequent encounter.
T84.54XS.......................... Infection and inflammatory reaction
due to internal left knee
prosthesis, sequela.
------------------------------------------------------------------------
The requestor stated that cases involving the DAIR procedure are
commonly assigned to MS-DRGs 463, 464, and 465 (Wound Debridement and
Skin Graft Except Hand for Musculoskeletal and Connective Tissue
Disorders with MCC, with CC, and without CC/MCC, respectively), MS-DRGs
480, 481, and 482 (Hip and Femur Procedures Except Major Joint with
MCC, with CC, and without CC/MCC, respectively) or MS-DRG 485, 486, and
487 (Knee Procedures with Principal Diagnosis of Infection with MCC,
with CC, and without CC/MCC, respectively). According to the requestor,
in each of the scenarios reviewed, the average cost and average length
of stay for cases with a principal diagnosis of PJI that grouped to the
``with CC'' or ``without CC/MCC'' MS-DRG are similar or higher and
longer than the other cases assigned to the same MS-DRGs.
The requestor also stated that one-stage hip or knee revision
procedures are typically assigned to MS-DRGs 466, 467, and 468 and the
findings from their analysis showed the presence of a PJI as the
principal diagnosis with a hip or knee revision procedure show a longer
length of stay and a similar or higher average cost than for the other
aseptic revision arthroplasties.
In addition, the requestor stated that its analysis of cases
reporting PJI with the last treatment option, amputation, assigned to
MS-DRGs 474, 475, and 476 (Amputation for Musculoskeletal System and
Connective Tissue Disorders with MCC, with CC, and without CC/MCC,
respectively) also showed a longer average length of stay and higher
average costs compared to all other non-PJI cases in MS-DRGs 474, 475,
and 476, further supporting the request to reassign cases to the ``with
CC'' severity level MS-DRG.
In summary, the requestor specifically recommended the following
modifications to the listed MS-DRGs for cases reporting a hip or knee
procedure with a principal diagnosis of PJI:
------------------------------------------------------------------------
Current MS-DRG assignment Requested MS-DRG assignment
------------------------------------------------------------------------
465 (Wound Debridement and Skin Graft MS-DRG 464 (Wound Debridement
Except Hand for Musculoskeletal and and Skin Graft Except Hand for
Connective Tissue Disorders without CC/ Musculoskeletal and Connective
MCC). Tissue Disorders with CC).
MS-DRG 468 (Revision of Hip or Knee MS-DRG 467 (Revision of Hip or
Replacement without CC/MCC). Knee Replacement with CC).
MS-DRG 476 (Amputation for MS-DRG 475 (Amputation for
Musculoskeletal System and Connective Musculoskeletal System and
Tissue Disorders without CC/MCC). Connective Tissue Disorders
with CC).
MS-DRG 482 (Hip and Femur Procedures MS-DRG 481 (Hip and Femur
Except Major Joint without CC/MCC). Procedures Except Major Joint
with CC).
MS-DRG 487 (Knee Procedures with MS-DRG 486 (Knee Procedures
Principal Diagnosis of Infection with Principal Diagnosis of
without CC/MCC). Infection with CC).
------------------------------------------------------------------------
We reviewed claims data from the September 2024 update of the FY
2024 MedPAR file for MS-DRGs 463, 464, 465, 466, 467, 468, 474, 475,
476, 480, 481, 482, 485, 486, and 487 and for cases reporting a
principal diagnosis of PJI with a hip or knee procedure. We refer the
reader to Table 6P. 6a for the list of diagnosis codes we analyzed to
identify a PJI and for the list of procedure codes we analyzed from the
previously listed MS-DRGs to identify a hip or knee procedure. Findings
from our analysis are shown in the following table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG Description cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
463............................ All cases...................... 3,909 14.2 $45,233
Cases with principal diagnosis 804 13.9 50,127
of PJI with hip or knee
procedure.
464............................ All cases...................... 5,775 7.3 26,757
[[Page 18051]]
Cases with principal diagnosis 1,358 7.7 32,474
of PJI with hip or knee
procedure.
465............................ All cases...................... 1,496 3.0 16,794
Cases with principal diagnosis 237 4.3 22,689
of PJI with hip or knee
procedure.
466............................ All cases...................... 4,282 9.0 43,314
Cases with principal diagnosis 460 11.2 40,433
of PJI with hip or knee
procedure.
467............................ All cases...................... 17,682 4.1 30,612
Cases with principal diagnosis 947 6.5 28,505
of PJI with hip or knee
procedure.
468............................ All cases...................... 12,986 1.8 24,921
Cases with principal diagnosis 160 4 23,978
of PJI with hip or knee
procedure.
474............................ All cases...................... 2,417 12.2 35,707
Cases with principal diagnosis 112 13.6 47,240
of PJI with hip or knee
procedure.
475............................ All cases...................... 2,634 7.3 19,577
Cases with principal diagnosis 166 7 20,739
of PJI with hip or knee
procedure.
476............................ All cases...................... 322 3.5 10,454
Cases with principal diagnosis 27 4.1 14,101
of PJI with hip or knee
procedure.
480............................ All cases...................... 26,238 7.3 26,430
Cases with principal diagnosis 136 11.7 38,407
of PJI with hip or knee
procedure.
481............................ All cases...................... 62,141 4.9 19,153
Cases with principal diagnosis 234 7.4 24,138
of PJI with hip or knee
procedure.
482............................ All cases...................... 13,842 3.5 14,886
Cases with principal diagnosis 30 4.6 19,122
of PJI with hip or knee
procedure.
485............................ All cases...................... 1,297 9.5 29,761
Cases with principal diagnosis 521 9.6 31,779
of PJI with hip or knee
procedure.
486............................ All cases...................... 2,574 6.0 19,679
Cases with principal diagnosis 985 5.8 21,376
of PJI with hip or knee
procedure.
487............................ All cases...................... 632 4.1 14,615
Cases with principal diagnosis 194 4 16,616
of PJI with hip or knee
procedure.
----------------------------------------------------------------------------------------------------------------
The findings show that the cases reporting a PJI with a hip or knee
procedure in MS-DRGs 466, 467, and 468 have a slightly longer average
length of stay and lower average costs compared to the average length
of stay and average costs of all the cases in their respective MS-DRGs.
Therefore, because the resource utilization of these cases is generally
comparable to all the cases in their respective MS-DRGs, we believe the
cases reporting a PJI in MS-DRGs 466, 467, and 468 appear to be
grouping appropriately in their current MS-DRG assignment.
The findings show that for the cases reporting a PJI with a hip or
knee procedure in MS-DRGs 463, 464, 465, 474, 475, 476, 485, 486, and
487, the average length of stay is comparable to the average length of
stay of all the cases in their respective MS-DRGs, however, the average
length of stay for the cases reporting a PJI with a hip or knee
procedure in MS-DRGs 480, 481, and 482 are notably longer compared to
the average length of stay of all the cases in their respective MS-
DRGs. Findings from our analysis also show that the average costs of
the cases reporting a PJI with a hip or knee procedure in MS-DRGs 463,
464, 465, 474, 475, 476, 480, 481, and 482 are higher compared to the
average costs of all the cases in their respective MS-DRGs with a
difference in average costs of approximately $5,459 for cases reporting
a PJI with a hip or knee procedure across MS-DRGs 463, 464, and 465, a
difference in average costs of approximately $5,190 for cases reporting
a PJI with a hip or knee procedure across MS-DRGs 474, 475, and 476,
and a difference in average costs of approximately $7,306 for cases
reporting a PJI with a hip or knee procedure across MS-DRGs 480, 481
and 482. However, because MS-DRGs 485, 486, and 487 currently include a
principal diagnosis of infection in the logic for case assignment to
these MS-DRGs, the difference in average costs for the cases reporting
a PJI with a hip or knee procedure compared to the average costs of all
the cases in their respective MS-DRG is minimal ($2,018, $1,697, and
$2,001, respectively).
Based on our review and analysis of the data, we disagree with the
request to reassign PJI cases from the lower severity ``without CC/
MCC'' level MS-DRG to the higher severity ``with CC'' level MS-DRG
suggested by the requestor as the average costs of the PJI cases in the
``without CC/MCC'' level are not comparable and do not align with the
average costs of all the cases at the ``with CC'' level. In addition,
our findings show that other than for MS-DRGs 466, 467, and 468, the
cases reporting a PJI with a hip or knee procedure at the higher ``with
CC'' level and the highest ``with MCC'' level have higher average costs
compared to all the cases in their respective MS-DRG. For example, as
reflected in the findings of our analysis for MS-DRGs 463, 464, and
465, if we were to reassign the 237 cases reporting a PJI with a hip or
knee procedure with an average length of stay of 4.3 days and average
costs of $22,689 from MS-DRG 465 to MS-DRG 464 where we found a total
of 5,775 cases with an average length of stay of 7.3 days and average
costs of $26,757, the 1,358 cases reporting a PJI with a hip or knee
procedure with an average length of stay of 7.7 days and average costs
of $32,474 in MS-DRG 464 and the 804 cases reporting a PJI with a hip
or knee procedure with an average length of stay of 13.9 days and
average costs of $50,127 in MS-DRG 463 would continue to not be
comparable from a resource perspective as compared to all the cases in
their assigned MS-DRGs. We believe the data support proposing a new
base MS-DRG for the cases reporting a PJI with a hip or knee procedure
in MS-DRGs 463, 464, 465, 474, 475, 476, 480, 481, and 482 to better
reflect the complexity of services, resource utilization, and severity
of illness of these patients.
Consistent with our established process as discussed in section
II.C.1.b. of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule,
once the decision has been made to propose to make further
modifications to the MS-DRGs, such as creating a new base MS-DRG, all
five criteria to create subgroups must be met for the base MS-DRG to be
split (or subdivided) by a CC subgroup. Therefore, we applied the
criteria to
[[Page 18052]]
create subgroups in a base MS-DRG. We note that, as shown in the table
that follows, a three-way split of this proposed new base MS-DRG failed
to meet the criterion that at least 500 or more cases are in the
without CC/MCC subgroup. The following table illustrates our findings.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 1,052 13.6 $48,305
With CC......................................................... 1,758 7.6 30,256
Without CC/MCC.................................................. 293 4.3 21,505
----------------------------------------------------------------------------------------------------------------
As discussed in section II.C.1.b. of the preamble of this FY 2026
IPPS/LTCH PPS proposed rule, if the criteria for a three-way split
fail, the next step is to determine if the criteria are satisfied for a
two-way split. We therefore applied the criteria for a two-way split
for the ``with MCC and without MCC'' subgroups and found that all five
criteria were met. The following table illustrates our findings.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
With MCC........................................................ 1,052 13.6 $48,305
Without MCC..................................................... 2,051 7.1 29,006
----------------------------------------------------------------------------------------------------------------
For the proposed new MS-DRGs for cases reporting a PJI with a hip
or knee procedure, there is at least (1) 500 cases in the MCC subgroup
and 500 cases in the without MCC subgroup; (2) 5 percent of the cases
in the MCC group and 5 percent in the without MCC subgroup; (3) a 20
percent difference in average costs between the MCC group and the
without MCC group; (4) a $2,000 difference in average costs between the
MCC group and the without MCC group; and (5) a 3-percent reduction in
cost variance, indicating that the proposed severity level splits
increase the explanatory power of the base MS-DRG in capturing
differences in expected cost between the proposed MS-DRG severity level
splits by at least 3 percent and thus improve the overall accuracy of
the IPPS payment system.
As a result, for FY 2026, we are proposing to create new MS-DRGs
403 and 404 (Hip or Knee Procedures with Principal Diagnosis of
Periprosthetic Joint Infection with MCC and without MCC, respectively).
The following table reflects a simulation of the proposed new MS-DRGs.
----------------------------------------------------------------------------------------------------------------
Number of Average length
Proposed new MS-DRGs cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
Proposed MS-DRG 403............................................. 1,052 13.6 $48,305
Proposed MS-DRG 404............................................. 2,051 7.1 29,006
----------------------------------------------------------------------------------------------------------------
b. Arthroscopy
Consistent with our annual review of the MS-DRGs, we consider
changes in resource consumption, treatment patterns, technology, and
any other factors that may change the relative use of hospital
resources. In our review of the claims data from the September 2024
update of the FY 2024 MedPAR file, we identified an extremely low
volume of cases for MS-DRG 509 (Arthroscopy). Specifically, we found 16
cases with an average length of stay of 5.2 days and average costs of
$18,239.
An arthroscopy is a surgical procedure that allows orthopaedic
surgeons to see the inside of a joint through a small incision and with
specialized instruments (for example, arthroscope). The ICD-10-PCS
codes describing arthroscopy and currently assigned to MS-DRG 509 are
shown in the following table.
Procedure Codes Describing Arthroscopy in MS-DRG 509
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
0RJ04ZZ........................... Inspection of occipital-cervical
joint, percutaneous endoscopic
approach.
0RJ14ZZ........................... Inspection of cervical vertebral
joint, percutaneous endoscopic
approach.
0RJ34ZZ........................... Inspection of cervical vertebral
disc, percutaneous endoscopic
approach.
0RJ44ZZ........................... Inspection of cervicothoracic
vertebral joint, percutaneous
endoscopic approach.
0RJ54ZZ........................... Inspection of cervicothoracic
vertebral disc, percutaneous
endoscopic approach.
0RJ64ZZ........................... Inspection of thoracic vertebral
joint, percutaneous endoscopic
approach.
0RJ94ZZ........................... Inspection of thoracic vertebral
disc, percutaneous endoscopic
approach.
0RJA4ZZ........................... Inspection of thoracolumbar
vertebral joint, percutaneous
endoscopic approach.
0RJB4ZZ........................... Inspection of thoracolumbar
vertebral disc, percutaneous
endoscopic approach.
0RJE4ZZ........................... Inspection of right sternoclavicular
joint, percutaneous endoscopic
approach.
0RJF4ZZ........................... Inspection of left sternoclavicular
joint, percutaneous endoscopic
approach.
0RJG4ZZ........................... Inspection of right
acromioclavicular joint,
percutaneous endoscopic approach.
0RJH4ZZ........................... Inspection of left acromioclavicular
joint, percutaneous endoscopic
approach.
[[Page 18053]]
0RJJ4ZZ........................... Inspection of right shoulder joint,
percutaneous endoscopic approach.
0RJK4ZZ........................... Inspection of left shoulder joint,
percutaneous endoscopic approach.
0RJL4ZZ........................... Inspection of right elbow joint,
percutaneous endoscopic approach.
0RJM4ZZ........................... Inspection of left elbow joint,
percutaneous endoscopic approach.
0RJN4ZZ........................... Inspection of right wrist joint,
percutaneous endoscopic approach.
0RJP4ZZ........................... Inspection of left wrist joint,
percutaneous endoscopic approach.
0RJQ4ZZ........................... Inspection of right carpal joint,
percutaneous endoscopic approach.
0RJR4ZZ........................... Inspection of left carpal joint,
percutaneous endoscopic approach.
0RJS4ZZ........................... Inspection of right carpometacarpal
joint, percutaneous endoscopic
approach.
0RJT4ZZ........................... Inspection of left carpometacarpal
joint, percutaneous endoscopic
approach.
0RJU4ZZ........................... Inspection of right
metacarpophalangeal joint,
percutaneous endoscopic approach.
0RJV4ZZ........................... Inspection of left
metacarpophalangeal joint,
percutaneous endoscopic approach.
0RJW4ZZ........................... Inspection of right finger
phalangeal joint, percutaneous
endoscopic approach.
0RJX4ZZ........................... Inspection of left finger phalangeal
joint, percutaneous endoscopic
approach.
0SJ04ZZ........................... Inspection of lumbar vertebral
joint, percutaneous endoscopic
approach.
0SJ34ZZ........................... Inspection of lumbosacral joint,
percutaneous endoscopic approach.
0SJ54ZZ........................... Inspection of sacrococcygeal joint,
percutaneous endoscopic approach.
0SJ64ZZ........................... Inspection of coccygeal joint,
percutaneous endoscopic approach.
0SJ74ZZ........................... Inspection of right sacroiliac
joint, percutaneous endoscopic
approach.
0SJ84ZZ........................... Inspection of left sacroiliac joint,
percutaneous endoscopic approach.
0SJ94ZZ........................... Inspection of right hip joint,
percutaneous endoscopic approach.
0SJB4ZZ........................... Inspection of left hip joint,
percutaneous endoscopic approach.
0SJC4ZZ........................... Inspection of right knee joint,
percutaneous endoscopic approach.
0SJD4ZZ........................... Inspection of left knee joint,
percutaneous endoscopic approach.
0SJF4ZZ........................... Inspection of right ankle joint,
percutaneous endoscopic approach.
0SJG4ZZ........................... Inspection of left ankle joint,
percutaneous endoscopic approach.
0SJH4ZZ........................... Inspection of right tarsal joint,
percutaneous endoscopic approach.
0SJJ4ZZ........................... Inspection of left tarsal joint,
percutaneous endoscopic approach.
0SJK4ZZ........................... Inspection of right tarsometatarsal
joint, percutaneous endoscopic
approach.
0SJL4ZZ........................... Inspection of left tarsometatarsal
joint, percutaneous endoscopic
approach.
0SJM4ZZ........................... Inspection of right metatarsal-
phalangeal joint, percutaneous
endoscopic approach.
0SJN4ZZ........................... Inspection of left metatarsal-
phalangeal joint, percutaneous
endoscopic approach.
0SJP4ZZ........................... Inspection of right toe phalangeal
joint, percutaneous endoscopic
approach.
0SJQ4ZZ........................... Inspection of left toe phalangeal
joint, percutaneous endoscopic
approach.
------------------------------------------------------------------------
In light of our initial findings of 16 cases for MS-DRG 509, we
further reviewed the MedPAR claims data for cases assigned to MS-DRG
509 for the past 5 fiscal years. As reflected in the following table,
the data indicate that the number of cases grouping to MS-DRG 509 has
steadily declined.
----------------------------------------------------------------------------------------------------------------
Number of Average lenth
FY and MedPAR data reviewed cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
FY 2022 (FY 2020 MedPAR)........................................ 25 3.9 $10,372
FY 2023 (FY 2021 MedPAR)........................................ 31 4.2 10,882
FY 2024 (FY 2022 MedPAR)........................................ 34 4.3 11,380
FY 2025 (FY 2023 MedPAR)........................................ 21 5.4 13,683
FY 2026 (FY 2024 MedPAR)........................................ 16 5.2 18,239
----------------------------------------------------------------------------------------------------------------
We note that, if, during our annual MS-DRG analysis we identify
that there are only a few patients in a respective MS-DRG, consistent
with our established process, we consider if there have been potential
changes in the clinical characteristics of the patients, treatment
patterns, or resource utilization. A principle of the MS-DRGs and the
characteristics of a meaningful DRG classification scheme is the
ability to detect such changes and accordingly, propose clinically
appropriate modifications that are also consistent with resource
utilization.
We believe that the volume of cases reporting the arthroscopy
procedures in the inpatient setting has shifted to the outpatient
setting over the years; it is usually performed as an outpatient
procedure. Of the 16 cases found to report an arthroscopy procedure in
the FY 2024 MedPAR data, 13 cases also reported another procedure. For
example, one case that reported procedure code 0RJK4ZZ (Inspection of
left shoulder joint, percutaneous endoscopic approach) also reported
procedure code 0RBK4ZZ (Excision of left shoulder joint, percutaneous
endoscopic approach). Procedure code 0RBK4ZZ is assigned to MS-DRGs
510, 511, and 512 (Shoulder, Elbow or Forearm Procedures, Except Major
Joint Procedures with MCC, with CC, and without CC/MCC, respectively).
However, because of the surgical hierarchy, the resulting assignment is
MS-DRG 509.
Using the September 2024 update of the FY 2024 MedPAR file, we also
reviewed the base DRG by severity claims data for MS-DRG 509 to
determine the number of cases, average length of stay and average costs
for the 16 cases by severity level (1=MCC, 2=CC and 3=NonCC). Our
findings are shown in the following table.
[[Page 18054]]
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
509-1........................................................... 4 5.5 $15,196
509-2........................................................... 7 6.1 27,880
509-3........................................................... 5 3.6 7,177
-----------------------------------------------
509 base DRG total.......................................... 16 5.2 18,239
----------------------------------------------------------------------------------------------------------------
Next, we reviewed the claims data from the September 2024 update of
the FY 2024 MedPAR file for MS-DRGs 510, 511, and 512 (Shoulder, Elbow
or Forearm Procedures, Except Major Joint Procedures with MCC, with CC,
and without CC/MCC, respectively); MS-DRGs 513 and 514 (Hand or Wrist
Procedures, Except Major Thumb or Joint Procedures with CC/MCC and
without CC/MCC, respectively); and MS-DRGs 515, 516, and 517 (Other
Musculoskeletal System and Connective Tissue O.R. Procedures with MCC,
with CC, and without CC/MCC, respectively) because these MS-DRGs are
considered to be clinically appropriate and consistent with the
arthroscopy procedure code descriptions in MS-DRG 509 previously listed
that specify the anatomic site. Our findings are shown in the following
tables.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
510............................................................. 916 6.4 $25,000
511............................................................. 2,538 4.3 18,701
512............................................................. 1,303 2.6 14,582
513............................................................. 1,335 5.0 14,219
514............................................................. 317 2.6 9,556
515............................................................. 4,095 8.4 28,466
516............................................................. 10,522 5.0 18,832
517............................................................. 5,951 2.9 14,067
----------------------------------------------------------------------------------------------------------------
Based on our analysis and review of the cases grouping to MS-DRG
509, we believe it is appropriate to delete MS-DRG 509 and reassign the
47 procedure codes describing arthroscopy of various anatomic sites to
clinically appropriate MS-DRGs that also align with the resource
utilization for these cases. For example, of the 16 cases found to
group to MS-DRG 509, in addition to identifying 13 cases reporting
additional procedures as previously discussed, we also identified 11
cases reporting diagnosis codes designated as a CC or MCC where the
average length of stay and average costs of those cases are comparable
with the average length of stay and average costs of the cases in the
MS-DRGs considered clinically appropriate for their reassignment.
Therefore, for FY 2026, of the 47 procedure codes previously listed
describing arthroscopy of various anatomic sites, we are proposing to:
1. Reassign the 8 procedure codes describing arthroscopy of the
shoulder or elbow joint to MS-DRGs 510, 511, and 512 (Shoulder, Elbow
or Forearm Procedures, Except Major Joint Procedures with MCC, with CC,
and without CC/MCC, respectively).
2. Reassign the 10 procedure codes describing arthroscopy of the
hand or wrist joint to MS-DRGs 513 and 514 (Hand or Wrist Procedures,
Except Major Thumb or Joint Procedures with CC/MCC and without CC/MCC,
respectively).
3. Reassign the 29 procedure codes describing arthroscopy of
various vertebral joints and other musculoskeletal joints to MS-DRGs
515, 516, and 517 (Other Musculoskeletal System and Connective Tissue
O.R. Procedures with MCC, with CC, and without CC/MCC, respectively).
We refer the reader to Table 6P.7a for the detailed list of
procedure codes with the proposed MS-DRG reassignments.
c. MS-DRG Logic for MS-DRGs 456, 457, and 458
We identified an inconsistency in the GROUPER logic for MS-DRGs
456, 457, and 458 (Spinal Fusion Except Cervical with Spinal Curvature,
Malignancy, Infection or Extensive Fusions with MCC, with CC, and
without CC/MCC, respectively) related to the ICD-10-CM diagnosis codes
describing a principal diagnosis of infection. The logic for case
assignment to MS-DRGs 456, 457, and 458 as displayed in the ICD-10 MS-
DRG Definitions Manual Version 42.1 (which is available on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software) is
comprised of four logic lists. The first logic list is entitled
``Spinal Fusion Except Cervical'' and is defined by a list of procedure
codes designated as O.R. procedures that describe spinal fusion
procedures of the thoracic, thoracolumbar, lumbar, lumbosacral,
sacrococcygeal, and sacroiliac joint. (We note that 12 procedure codes
describing Fusion of coccygeal joint were deleted effective with
discharges beginning April 1, 2025, in version 42.1). The second logic
list is entitled ``Spinal Curvature/Malignancy/Infection'' and is
defined by a list of diagnosis codes describing spinal curvature,
spinal malignancy, and spinal infection that are used to define the
logic for case assignment when any one of the listed diagnosis codes is
reported as the principal diagnosis. The third logic list is entitled
``OR Secondary Diagnosis'' and is defined by a list of diagnosis codes
describing curvature of the spine that are used to define the logic for
case assignment when any one of the listed codes is reported as a
secondary diagnosis. The fourth logic list is entitled ``Extensive
Fusions'' and is defined by a list of procedure codes designated as
O.R. procedures that describe extensive spinal fusion procedures. We
refer the reader to the ICD-10 MS-DRG Definitions Manual Version 42.1
(available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) for
[[Page 18055]]
complete documentation of the GROUPER logic for MS-DRGs 456, 457, and
458.
In the second logic list entitled ``Spinal Curvature/Malignancy/
Infection'' there are a subset of diagnosis codes describing spinal
infections. In our review and analysis of MS-DRGs 456, 457, and 458, we
identified additional diagnosis codes within the ICD-10-CM
classification describing spinal infections that are not currently
listed in the logic for case assignment to MS-DRGs 456, 457, and 458.
Specifically, we identified the following 47 diagnoses that we believe
are clinically appropriate to add to the existing diagnosis codes
describing spinal infections in MS-DRGs 456, 457, and 458.
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
A02.24....................... Salmonella osteomyelitis.
A54.40....................... Gonococcal infection of musculoskeletal
system, unspecified.
A54.41....................... Gonococcal spondylopathy.
A54.43....................... Gonococcal osteomyelitis.
A54.49....................... Gonococcal infection of other
musculoskeletal tissue.
M46.21....................... Osteomyelitis of vertebra, occipito-
atlanto-axial region.
M46.22....................... Osteomyelitis of vertebra, cervical
region.
M46.23....................... Osteomyelitis of vertebra,
cervicothoracic region.
M46.30....................... Infection of intervertebral disc
(pyogenic), site unspecified.
M46.31....................... Infection of intervertebral disc
(pyogenic), occipito-atlanto-axial
region.
M46.32....................... Infection of intervertebral disc
(pyogenic), cervical region.
M46.33....................... Infection of intervertebral disc
(pyogenic), cervicothoracic region.
M46.34....................... Infection of intervertebral disc
(pyogenic), thoracic region.
M46.35....................... Infection of intervertebral disc
(pyogenic), thoracolumbar region.
M46.36....................... Infection of intervertebral disc
(pyogenic), lumbar region.
M46.37....................... Infection of intervertebral disc
(pyogenic), lumbosacral region.
M46.38....................... Infection of intervertebral disc
(pyogenic), sacral and sacrococcygeal
region.
M46.39....................... Infection of intervertebral disc
(pyogenic), multiple sites in spine.
M46.50....................... Other infective spondylopathies, site
unspecified.
M46.51....................... Other infective spondylopathies, occipito-
atlanto-axial region.
M46.52....................... Other infective spondylopathies, cervical
region.
M46.53....................... Other infective spondylopathies,
cervicothoracic region.
M46.54....................... Other infective spondylopathies, thoracic
region.
M46.55....................... Other infective spondylopathies,
thoracolumbar region.
M46.56....................... Other infective spondylopathies, lumbar
region.
M46.57....................... Other infective spondylopathies,
lumbosacral region.
M46.58....................... Other infective spondylopathies, sacral
and sacrococcygeal region.
M46.59....................... Other infective spondylopathies, multiple
sites in spine.
M86.00....................... Acute hematogenous osteomyelitis,
unspecified site.
M86.09....................... Acute hematogenous osteomyelitis,
multiple sites.
M86.10....................... Other acute osteomyelitis, unspecified
site.
M86.19....................... Other acute osteomyelitis, multiple
sites.
M86.20....................... Subacute osteomyelitis, unspecified site.
M86.29....................... Subacute osteomyelitis, multiple sites.
M86.30....................... Chronic multifocal osteomyelitis,
unspecified site.
M86.39....................... Chronic multifocal osteomyelitis,
multiple sites.
M86.40....................... Chronic osteomyelitis with draining
sinus, unspecified site.
M86.49....................... Chronic osteomyelitis with draining
sinus, multiple sites.
M86.50....................... Other chronic hematogenous osteomyelitis,
unspecified site.
M86.59....................... Other chronic hematogenous osteomyelitis,
multiple sites.
M86.60....................... Other chronic osteomyelitis, unspecified
site.
M86.69....................... Other chronic osteomyelitis, multiple
sites.
M86.8X0...................... Other osteomyelitis, multiple sites.
M86.8X9...................... Other osteomyelitis, unspecified sites.
M86.9........................ Osteomyelitis, unspecified.
T84.63XA..................... Infection and inflammatory reaction due
to internal fixation device of spine,
initial encounter.
T84.69XA..................... Infection and inflammatory reaction due
to internal fixation device of other
site, initial encounter.
------------------------------------------------------------------------
Therefore, for clinical consistency and because these codes
describe spinal infections that could reasonably require a spinal
fusion procedure, we are proposing to add the previously listed
diagnosis codes to the logic list entitled ``Spinal Curvature/
Malignancy/Infection'' in MS-DRGs 456, 457, and 458, effective October
1, 2025, for FY 2026.
We also identified eight diagnosis codes currently listed in the
second logic list entitled ``Spinal Curvature/Malignancy/Infection''
for case assignment to MS-DRGs 456, 457, and 458 that we believe are
not clinically appropriate to maintain in the list. Specifically, we
identified the following diagnoses.
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
M4850XA........................... Collapsed vertebra, not elsewhere
classified, site unspecified,
initial encounter for fracture.
M4854XA........................... Collapsed vertebra, not elsewhere
classified, thoracic region,
initial encounter for fracture.
M4855XA........................... Collapsed vertebra, not elsewhere
classified, thoracolumbar region,
initial encounter for fracture.
M4856XA........................... Collapsed vertebra, not elsewhere
classified, lumbar region, initial
encounter for fracture.
[[Page 18056]]
M4857XA........................... Collapsed vertebra, not elsewhere
classified, lumbosacral region,
initial encounter for fracture.
M4858XA........................... Collapsed vertebra, not elsewhere
classified, sacral and
sacrococcygeal region, initial
encounter for fracture.
M8008XA........................... Age-related osteoporosis with
current pathological fracture,
vertebra(e), initial encounter for
fracture.
M8088XA........................... Other osteoporosis with current
pathological fracture, vertebra(e),
initial encounter for fracture.
------------------------------------------------------------------------
The previously listed diagnosis codes do not describe a spinal
curvature, malignancy or infection, rather they describe compression
fractures of various anatomic sites (for example, collapsed vertebra)
and osteoporosis is a condition where the bones become weakened leading
to an increased risk of bone fracture. Therefore, for clinical
consistency and to ensure accuracy in the logic for case assignment, we
are proposing to remove the eight previously listed diagnosis codes
from the logic list entitled ``Spinal Curvature/Malignancy/Infection''
in MS-DRGs 456, 457, and 458, effective October 1, 2025, for FY 2026.
6. Review of Procedure Codes in MS-DRGs 981 Through 983 and 987 Through
989
We annually conduct a review of procedures producing assignment to
MS-DRGs 981 through 983 (Extensive O.R. Procedure Unrelated to
Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) or MS-DRGs 987 through 989 (Non-Extensive O.R. Procedure
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) on the basis of volume, by procedure, to see if it would
be appropriate to move cases reporting these procedure codes out of
these MS-DRGs into one of the surgical MS-DRGs for the MDC into which
the principal diagnosis falls. The data are arrayed in two ways for
comparison purposes. We look at a frequency count of each major
operative procedure code. We also compare procedures across MDCs by
volume of procedure codes within each MDC. We use this information to
determine which procedure codes and diagnosis codes to examine.
We identify those procedures occurring in conjunction with certain
principal diagnoses with sufficient frequency to justify adding them to
one of the surgical MS-DRGs for the MDC in which the diagnosis falls.
We also consider whether it would be more appropriate to move the
principal diagnosis codes into the MDC to which the procedure is
currently assigned.
Based on the results of our review of the claims data from the
September 2024 update of the FY 2024 MedPAR file of cases found to
group to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we are
proposing to move the cases reporting the procedures and/or principal
diagnosis codes described in this section of this proposed rule from
MS-DRGs 981 through 983 or MS-DRGs 987 through 989 into one of the
surgical MS-DRGs for the MDC into which the principal diagnosis or
procedure is assigned.
1. Control of Bleeding in the Genitourinary Tract
During the review of the cases that group to MS-DRGs 981 through
983, we noted that when ICD-10-PCS procedure codes describing the
control of bleeding in the genitourinary tract are reported in
conjunction with ICD-10-CM diagnosis codes in MDC 16 (Diseases and
Disorders of Blood, Blood Forming Organs, and Immunologic Disorders),
the cases group to MS-DRGs 981 through 983. The five ICD-10-CM
procedure codes reviewed, as well as their current MDC assignments, are
found in the table:
------------------------------------------------------------------------
ICD-10-PCS code Description MDC
------------------------------------------------------------------------
0W3R0ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21;
genitourinary 24
tract, open
approach.
0W3R3ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21;
genitourinary 24
tract, percutaneous
approach.
0W3R4ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21;
genitourinary 24
tract, percutaneous
endoscopic approach.
0W3R7ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21;
genitourinary 24
tract, via natural
or artificial
opening.
0W3R8ZZ................ Control bleeding in 05; 11; 12; 13; 17; 21;
genitourinary 24
tract, via natural
or artificial
opening endoscopic.
------------------------------------------------------------------------
We refer the reader to Appendix E of the ICD-10 MS-DRG Version 42.1
Definitions Manual, which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html, for the MS-DRG assignment for each procedure code
listed and further discussion of how each procedure code may be
assigned to multiple MDCs and MS-DRGs under the IPPS.
The principal diagnosis most frequently reported with the five ICD-
10-PCS procedure codes describing the control of bleeding in the
genitourinary tract in MDC 16 is ICD-10-CM code D68.32 (Hemorrhagic
disorder due to extrinsic circulating anticoagulants). Hemorrhagic
disorder due to extrinsic circulating anticoagulants is a condition
that occurs when bleeding is caused by anticoagulants or
antithrombotics, which are medicines commonly used to treat or prevent
blood clots by decreasing the amount of clotting proteins in the blood.
We examined claims data from the September 2024 update of the FY
2024 MedPAR file to identify the average length of stay and average
costs for cases reporting a procedure code describing the control of
bleeding in the genitourinary tract with a principal diagnosis in MDC
16, which are currently grouping to MS-DRGs 981 through 983, as well as
all cases in MS-DRGs 981 through 983. Our findings are shown in the
following table.
[[Page 18057]]
MS-DRGs 981-983--All Cases and Cases Reporting a Procedure Code Describing the Control of Bleeding in the
Genitourinary Tract and a Principal Diagnosis in MDC 16
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 981--All cases........................................... 19,155 11.7 $40,259
MS-DRG 981--Cases reporting procedure code describing the 23 9 27,900
control of bleeding in the genitourinary tract and a principal
diagnosis in MDC 16............................................
MS-DRG 982--All cases........................................... 9,392 5.7 21,951
MS-DRG 982--Cases reporting procedure code describing the 64 4.3 13,462
control of bleeding in the genitourinary tract and a principal
diagnosis in MDC 16............................................
MS-DRG 983--All cases........................................... 1,831 2.6 15,837
MS-DRG 983--Cases reporting procedure code describing the 5 2.8 9,416
control of bleeding in the genitourinary tract and a principal
diagnosis in MDC 16............................................
----------------------------------------------------------------------------------------------------------------
We then examined the MS-DRGs within MDC 16 and determined that the
cases reporting procedure codes describing the control of bleeding in
the genitourinary tract with a principal diagnosis in MDC 16 would most
suitably group to MS-DRGs 802, 803, and 804 (Other O.R. Procedures of
the Blood and Blood Forming Organs with MCC, with CC, and without CC/
MCC, respectively), which contains a group of procedures that are only
infrequently related to the diagnoses in the MDC, but are still
occasionally performed on patients with cases assigned to the MDC with
these diagnoses.
To determine how the resources for this subset of cases compared to
cases in MS-DRGs 802, 803, and 804 as a whole, we examined the average
costs and length of stay for cases in MS-DRGs 802, 803, and 804. Our
findings are shown in this table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 802--All cases........................................... 417 11.6 $37,595
MS-DRG 803--All cases........................................... 452 5.3 16,762
MS-DRG 804--All cases........................................... 209 2.2 12,605
----------------------------------------------------------------------------------------------------------------
We reviewed the data and noted for this subset of cases, the
average costs are lower and the average length of stays are generally
shorter than for cases in MS-DRGs 802, 803, and 804. However, we
believe that when an ICD-10-PCS procedure code describing the control
of bleeding in the genitourinary tract is reported with a principal
diagnosis in MDC 16 (typically hemorrhagic disorder due to extrinsic
circulating anticoagulants), the procedure is related to the principal
diagnosis. Because a procedure code describing the control of bleeding
in the genitourinary tract would be expected to be related to a
principal diagnosis describing a hemorrhagic disorder due to extrinsic
circulating anticoagulants, it is clinically appropriate for the
procedures to group to the same MS-DRGs as the principal diagnoses.
Therefore, we are proposing to add the five procedure codes listed
previously to MDC 16. Under this proposal, cases reporting a procedure
code describing the control of bleeding in the genitourinary tract with
a principal diagnosis of a hemorrhagic disorder due to extrinsic
circulating anticoagulants (diagnosis code D68.32) in MDC 16 would
group to MS-DRGs 802, 803, and 804.
2. Removal of Infusion Device From Peritoneal Cavity
During the review of the cases that group to MS-DRGs 981 through
983, we noted that when ICD-10-PCS procedure codes describing the
removal of an infusion device from the peritoneal cavity are reported
in conjunction with ICD-10-CM diagnosis codes in MDC 21 (Injuries,
Poisonings and Toxic Effects of Drugs), the cases group to MS-DRGs 981
through 983. The three ICD-10-PCS procedure codes reviewed, as well as
their current MDC assignments, are found in the table:
------------------------------------------------------------------------
ICD-10-PCS code Description MDC
------------------------------------------------------------------------
0WPG03Z............................ Removal of infusion device 06; 21
from peritoneal cavity,
open approach.
0WPG33Z............................ Removal of infusion device 06; 21
from peritoneal cavity,
percutaneous approach.
0WPG43Z............................ Removal of infusion device 06; 21
from peritoneal cavity,
percutaneous endoscopic
approach.
------------------------------------------------------------------------
We refer the reader to Appendix E of the ICD-10 MS-DRG Version 42.1
Definitions Manual (which is available on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html) for the MS-DRG assignment for each procedure code
listed and further discussion of how each procedure code may be
assigned to multiple MDCs and MS-DRGs under the IPPS.
The principal diagnosis most frequently reported with the three
ICD-10-PCS procedure codes describing the removal of an infusion device
from the peritoneal cavity in MDC 21 is ICD-10-CM code T85.71XA
(Infection and inflammatory reaction due to peritoneal dialysis
catheter, initial encounter).
We examined claims data from the September 2024 update of the FY
2024 MedPAR file to identify the average length of stay and average
costs for cases reporting a procedure code describing the removal of an
infusion device from the peritoneal cavity with a principal diagnosis
in MDC 21, which are currently grouping to MS-DRGs 981 through 983, as
well as all cases in MS-
[[Page 18058]]
DRGs 981 through 983. Our findings are shown in the following table.
MS-DRGs 981-983--All Cases and Cases Reporting a Procedure Code Describing the Removal of an Infusion Device
From the Peritoneal Cavity and a Principal Diagnosis in MDC 21
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 981--All cases........................................... 19,155 11.7 $40,259
MS-DRG 981--Cases reporting procedure code describing the 85 8.8 25,556
removal of an infusion device from the peritoneal cavity and a
principal diagnosis in MDC 21..................................
MS-DRG 982--All cases........................................... 9,392 5.7 21,951
MS-DRG 982--Cases reporting procedure code describing the 1 4 11,845
removal of an infusion device from the peritoneal cavity and a
principal diagnosis in MDC 21..................................
MS-DRG 983--All cases........................................... 1,831 2.6 15,837
MS-DRG 983--Cases reporting procedure code describing the 0 0 0
removal of an infusion device from the peritoneal cavity and a
principal diagnosis in MDC 21..................................
----------------------------------------------------------------------------------------------------------------
We then examined the MS-DRGs within MDC 21 and determined that the
cases reporting procedure codes describing the removal of an infusion
device from the peritoneal cavity with a principal diagnosis in MDC 21
would most suitably group to MS-DRGs 907, 908, and 909 (Other O.R.
Procedures for Injuries with MCC, with CC, and without CC/MCC,
respectively), which contains other operating room procedures performed
for injuries as further detailed below.
To determine how the resources for this subset of cases compared to
cases in MS-DRGs 907, 908, and 909 as a whole, we examined the average
costs and length of stay for cases in MS-DRGs 907, 908, and 909. Our
findings are shown in this table.
----------------------------------------------------------------------------------------------------------------
Number of Average length
MS-DRG cases of stay Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 907--All cases........................................... 7,754 9.4 $34,049
MS-DRG 908--All cases........................................... 6,625 4.8 17,938
MS-DRG 909--All cases........................................... 1,721 2.7 12,154
----------------------------------------------------------------------------------------------------------------
We reviewed the data and noted for the subset of cases reporting
procedure codes describing the removal of an infusion device from the
peritoneal cavity with a principal diagnosis in MDC 21, the average
costs are lower and the average length of stays are shorter than for
cases in MS-DRGs 907, 908, and 909. However, we believe that when an
ICD-10-PCS procedure code describing the removal of an infusion device
from the peritoneal cavity is reported with a principal diagnosis in
MDC 21 (typically infection and inflammatory reaction due to peritoneal
dialysis catheter), the procedure is related to the principal
diagnosis. Because a procedure code describing the removal of an
infusion device from the peritoneal cavity would be expected to be
related to a principal diagnosis describing an infected catheter used
for peritoneal dialysis causing inflammation in the surrounding tissue,
it is clinically appropriate for the procedures to group to the same
MS-DRGs as the principal diagnoses. Therefore, we are proposing to add
the three procedure codes listed previously to MDC 21. Under this
proposal, cases reporting a procedure code describing the removal of an
infusion device from the peritoneal cavity with a principal diagnosis
of an infection and inflammatory reaction due to peritoneal dialysis
catheter, initial encounter (diagnosis code T85.71XA) in MDC 21 would
group to MS-DRGs 907, 908, and 909.
In addition to the internal review of procedures producing
assignment to MS-DRGs 981 through 983 or MS-DRGs 987 through 989, we
also consider requests that we receive to examine cases found to group
to MS-DRGs 981 through 983 or MS-DRGs 987 through 989 to determine if
it would be appropriate to add procedure codes to one of the surgical
MS-DRGs for the MDC into which the principal diagnosis falls or to move
the principal diagnosis to the surgical MS-DRGs to which the procedure
codes are assigned. We did not receive any requests suggesting
reassignment.
We also review the list of ICD-10-PCS procedures that, when in
combination with their principal diagnosis code, result in assignment
to MS DRGs 981 through 983, or 987 through 989, to ascertain whether
any of those procedures should be reassigned from one of those two
groups of MS-DRGs to the other group of MS-DRGs based on average costs
and the average length of stay. We look at the data for trends such as
shifts in treatment practice or reporting practice that would make the
resulting MS-DRG assignment illogical. If we find these shifts, we
would propose to move cases to keep the MS-DRGs clinically similar or
to propose MS-DRG assignments for the cases in a similar manner.
Generally, we propose to move only those procedures for which we have
an adequate number of discharges to analyze the data.
Additionally, we also consider requests that we receive to examine
cases found to group to MS-DRGs 981 through 983 or MS-DRGs 987 through
989 to determine if it would be appropriate for the cases to be
reassigned from one of the MS-DRG groups to the other. We did not
receive any requests suggesting reassignment. Further, based on the
results of our review of the claims data from the September 2024 update
of the FY 2024 MedPAR file we did not identify any cases for
reassignment. Therefore, for FY 2026 we are not proposing to move any
cases reporting procedure codes from MS-DRGs 981 through 983 to MS-DRGs
987 through 989 or vice versa.
[[Page 18059]]
7. Operating Room (O.R.) and Non-O.R. Procedures
a. Background
Under the IPPS MS-DRGs (and former CMS MS-DRGs), we have a list of
procedure codes that are considered operating room (O.R.) procedures.
Historically, we developed this list using physician panels that
classified each procedure code based on the procedure and its effect on
consumption of hospital resources. For example, generally the presence
of a surgical procedure which required the use of the operating room
would be expected to have a significant effect on the type of hospital
resources (for example, operating room, recovery room, and anesthesia)
used by a patient, and therefore, these patients were considered
surgical. Because the claims data generally available do not precisely
indicate whether a patient was taken to the operating room, surgical
patients were identified based on the procedures that were performed.
Generally, if the procedure was not expected to require the use of
the operating room, the patient would be considered medical (non-O.R.).
Currently, each ICD-10-PCS procedure code has designations that
determine whether and in what way the presence of that procedure on a
claim impacts the MS-DRG assignment. First, each ICD-10-PCS procedure
code is either designated as an O.R. procedure for purposes of MS- DRG
assignment (``O.R. procedures'') or is not designated as an O.R.
procedure for purposes of MS-DRG assignment (``non-O.R. procedures'').
Second, for each procedure that is designated as an O.R. procedure,
that O.R. procedure is further classified as either extensive or non-
extensive. Third, for each procedure that is designated as a non-O.R.
procedure, that non-O.R. procedure is further classified as either
affecting the MS-DRG assignment or not affecting the MS-DRG assignment.
We refer to these designations that do affect MS-DRG assignment as
``non O.R. affecting the MS-DRG.'' For new procedure codes that have
been finalized through the ICD-10 Coordination and Maintenance
Committee meeting process and are proposed to be classified as O.R.
procedures or non-O.R. procedures affecting the MS-DRG, we recommend
the MS-DRG assignment which is then made available in association with
the proposed rule (Table 6B.--New Procedure Codes) and subject to
public comment. These proposed assignments are generally based on the
assignment of predecessor codes or the assignment of similar codes. For
example, we generally examine the MS-DRG assignment for similar
procedures, such as the other approaches for that procedure, to
determine the most appropriate MS-DRG assignment for procedures
proposed to be newly designated as O.R. procedures. As discussed in
section II.C.13 of the preamble of this FY 2026 IPPS/LTCH PPS proposed
rule, we are making Table 6B.--New Procedure Codes--FY 2026 available
on the CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps.html. We also refer
readers to the ICD-10 MS-DRG Version 42.1 Definitions Manual at:
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.html for detailed
information regarding the designation of procedures as O.R. or non-O.R.
(affecting the MS- DRG) in Appendix E--Operating Room Procedures and
Procedure Code/MS-DRG Index.
In the FY 2020 IPPS/LTCH PPS proposed rule, we stated that, given
the long period of time that has elapsed since the original O.R.
(extensive and non-extensive) and non-O.R. designations were
established, the incremental changes that have occurred to these O.R.
and non-O.R. procedure code lists, and changes in the way inpatient
care is delivered, we plan to conduct a comprehensive, systematic
review of the ICD-10-PCS procedure codes. This will be a multiyear
project during which we will also review the process for determining
when a procedure is considered an operating room procedure. For
example, we may restructure the current O.R. and non-O.R. designations
for procedures by leveraging the detail that is now available in the
ICD-10 claims data. We refer readers to the discussion regarding the
designation of procedure codes in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38066) where we stated that the determination of when a
procedure code should be designated as an O.R. procedure has become a
much more complex task. This is, in part, due to the number of various
approaches available in the ICD-10-PCS classification, as well as
changes in medical practice. While we have typically evaluated
procedures on the basis of whether or not they would be performed in an
operating room, we believe that there may be other factors to consider
with regard to resource utilization, particularly with the
implementation of ICD-10.
We discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR
19230) that, as a result of this planned review and potential
restructuring, procedures that are currently designated as O.R.
procedures may no longer warrant that designation, and conversely,
procedures that are currently designated as non-O.R. procedures may
warrant an O.R. designation. We intend to consider the resources used
and how a procedure should affect the MS-DRG assignment. We may also
consider the effect of certain surgical approaches to evaluate whether
to subdivide a subset of MS-DRGs based on a specific surgical approach.
We stated we plan to utilize our available MedPAR claims data as a
basis for this review and the input of our clinical advisors. As part
of this comprehensive review of the procedure codes, we also intend to
evaluate the MS-DRG assignment of the procedures and the current
surgical hierarchy because both of these factor into the process of
refining the ICD-10 MS-DRGs to better recognize complexity of service
and resource utilization.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58540 through
58541), we provided a summary of the comments we had received in
response to our request for feedback on what factors or criteria to
consider in determining whether a procedure is designated as an O.R.
procedure in the ICD-10-PCS classification system for future
consideration. We also stated that in consideration of the PHE, we
believed it may be appropriate to allow additional time for the claims
data to stabilize prior to selecting the timeframe to analyze for this
review.
For this FY 2026 IPPS/LTCH PPS proposed rule, we continue to
believe additional time is necessary as we continue to develop our
process and methodology. As discussed in the FY 2024 IPPS/LTCH PPS
final rule (88 FR 58749), we have signaled in prior rulemaking that the
designation of an O.R. procedure encompasses more than the physical
location of the hospital room in which the procedure may be performed;
in other words, the performance of a procedure in an operating room is
not the sole determining factor we will consider as we examine the
designation of a procedure in the ICD-10-PCS classification system. We
are exploring alternatives on how we may restructure the current O.R.
and non-O.R. designations for procedures by leveraging the detail that
is available in the ICD-10 claims data. We are considering the feedback
received on what factors and/or criteria to consider in determining
whether a procedure is designated as an O.R. procedure in the ICD-10-
PCS classification system as we continue to develop our process and
[[Page 18060]]
methodology and will provide more detail on this analysis and the
methodology for conducting this comprehensive review in future
rulemaking. We encourage the public to continue to submit feedback and
comments on any other factors in consideration of our refinement
efforts to recognize and differentiate consumption of resources under
the ICD-10 MS-DRGs.
For this FY 2026 IPPS/LTCH PPS proposed rule, we received requests
regarding changing the designation of specific ICD-10-PCS procedure
codes from non-O.R. to O.R. procedures. In this section of the preamble
of this FY 2026 IPPS/LTCH PPS proposed rule, we detail and respond to
those requests. In this section of the preamble of this proposed rule,
we also discuss the proposal we are making based on our internal review
and analysis and the process that was utilized for evaluating each
procedure code. For each procedure, we considered--
Whether the procedure would typically require the
resources of an operating room;
Whether it is an extensive or a non-extensive procedure;
and
To which MS-DRGs the procedure should be assigned.
We note that many MS-DRGs require the presence of any O.R.
procedure. As a result, cases with a principal diagnosis associated
with a particular MS-DRG would, by default, be grouped to that MS-DRG.
Therefore, we do not list these MS-DRGs in our discussion in this
section of the preamble of this FY 2026 IPPS/LTCH PPS proposed rule.
Instead, we only discuss MS-DRGs that require explicitly adding the
relevant procedure codes to the GROUPER logic in order for those
procedure codes to affect the MS-DRG assignment as intended.
For procedures that would not typically require the resources of an
operating room, we determined if the procedure should affect the MS-DRG
assignment. In cases where we are proposing to change the designation
of procedure codes from non-O.R. procedures to O.R. procedures, we also
are proposing one or more MS-DRGs with which these procedures are
clinically aligned and to which the procedure code would be assigned.
In addition, cases that contain O.R. procedures will map to MS-DRGs
981, 982, or 983 (Extensive O.R. Procedure Unrelated to Principal
Diagnosis with MCC, with CC, and without CC/MCC, respectively) or MS-
DRGs 987, 988, or 989 (Non-Extensive O.R. Procedure Unrelated to
Principal Diagnosis with MCC, with CC, and without CC/MCC,
respectively) when they do not contain a principal diagnosis that
corresponds to one of the MDCs to which that procedure is assigned.
These procedures need not be assigned to MS-DRGs 981 through 989 in
order for this to occur. Therefore, we did not specifically address
that aspect in summarizing the request and our response to that request
or the proposal we are making based on our internal review and analysis
in this section of the preamble of this FY 2026 IPPS/LTCH PPS proposed
rule.
b. Non-O.R. Procedures to O.R. Procedures
(1) Open Drainage of the Mandible
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 44895 through
44896), we discussed a request we received to change the designation of
procedure codes 0N9R0ZZ (Drainage of maxilla, open approach), 0N9T0ZZ
(Drainage of right mandible, open approach), and 0N9V0ZZ (Drainage of
left mandible, open approach), from non-O.R. to O.R. procedures. In the
FY 2022 final rule, we stated that we disagreed that the procedures
describing the open drainage of the maxilla or mandible typically
require the resources of an operating room. We stated that if admission
is required for the treatment of a jaw infection, the admission is
quite likely due to the need for IV antibiotics as opposed to the need
for operating room resources in an inpatient setting. After
consideration of the public comments we received, we finalized our
proposal to maintain the non-O.R. designation of ICD-10-PCS procedure
codes 0N9R0ZZ, 0N9T0ZZ, and 0N9V0ZZ, without modification, for FY 2022.
For this FY 2026 IPPS/LTCH PPS proposed rule, we again received a
request to change the designation of ICD-10-PCS codes 0N9T0ZZ (Drainage
of right mandible, open approach), and 0N9V0ZZ (Drainage of left
mandible, open approach), from non-O.R. to O.R. The requestor
identified procedure code 0W950ZZ (Drainage of lower jaw, open
approach) that is currently designated as an O.R. procedure and stated
that the body part value of mandible is more specific than body part
value of lower jaw. The requestor also stated that in the ICD-10-PCS
classification, other procedure codes that describe drainage procedures
performed on body parts deeper than subcutaneous tissue, such as
muscles, tendons, and bone, are designated as O.R. procedures.
Therefore, the requestor stated that procedure codes 0N9T0ZZ and
0N9V0ZZ should also be recognized as O.R. procedures for purposes of
MS-DRG assignment. The requestor did not provide a specific list of the
procedure codes that describe drainage procedures performed on body
parts deeper than subcutaneous tissue, such as muscles, tendons, and
bone, that are currently designated as O.R. procedures for CMS to
review.
In the ICD-10 MS-DRGs Definitions Manual Version 42.1, procedure
codes 0N9T0ZZ and 0N9V0ZZ are currently designated as non-O.R.
procedures for purposes of MS-DRG assignment. We reviewed this issue
and continue to disagree that the procedures describing the open
drainage of the mandible are typically performed in the operating room
under general anesthesia. As discussed in the FY 2022 IPPS/LTCH PPS
final rule (86 FR 44896), these procedures can be done in an oral
surgeon's office, or an outpatient setting and are rarely performed in
the inpatient setting. Therefore, we are proposing to maintain the
current non-O.R. designation of ICD-10-PCS procedure codes 0N9T0ZZ and
0N9V0ZZ.
In our review of this issue, we agree with the requestor that in
the ICD-10 MS-DRGs Definitions Manual Version 42.1, procedure code
0W950ZZ (Drainage of lower jaw, open approach) is currently designated
as an O.R. procedure for purposes of MS-DRG assignment. While we have
stated in prior rulemaking that a correlation cannot be made between
procedures performed in general anatomic regions and procedures
performed in specific body parts because these procedures coded with
the general anatomic regions body part represent a broader range of
procedures that cannot be coded to a specific body part, we continue to
believe if admission is required for the treatment of a jaw infection,
the admission is quite likely due to the need for IV antibiotics as
opposed to the need for operating room resources in an inpatient
setting. Like procedures that describe the open drainage of mandible,
procedures to drain the lower jaw can also be done in an oral surgeon's
office or an outpatient setting and are rarely performed in the
inpatient setting. We agree that procedures that describe the open
drainage of mandible consume resources comparable to the related ICD-
10-PCS procedure code that describes the open drainage of the jaw.
These procedures do not typically require the resources of an operating
room and are not surgical in nature. Therefore, for clinical
consistency, we are proposing to remove procedure code 0W950ZZ
(Drainage of lower jaw, open approach) from the FY 2026 ICD-10 MS-DRGs
Version 43 Definitions Manual in Appendix E--Operating
[[Page 18061]]
Room Procedures and Procedure Code/MS-DRG Index as an O.R. procedure.
Under this proposal, this procedure would no longer impact MS-DRG
assignment.
(2) Introduction of Paclitaxel-Coated Balloon Catheter Technology
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69094 through
69096), we summarized and responded to comments we received regarding
the O.R. designation and MS-DRG assignment of 16 procedure codes that
describe introduction of the AGENTTM Paclitaxel-Coated
Balloon Catheter technology that is indicated to treat coronary in-
stent restenosis (ISR) in patients with coronary artery disease. The
following procedure codes describing use of the AGENTTM
Paclitaxel-Coated Balloon Catheter technology were finalized following
the March 19, 2024, ICD-10 Coordination and Maintenance Committee
meeting and made available via the CMS website on June 5, 2024, at
https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps. We refer the reader to the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials for
additional detailed information regarding the request, including a
recording of the discussion and the related meeting materials.
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
XW0J3HA..................... Introduction of paclitaxel-coated balloon
technology, one balloon into coronary
artery, one artery, percutaneous
approach, new technology group 10.
XW0J3JA..................... Introduction of paclitaxel-coated balloon
technology, two balloons into coronary
artery, one artery, percutaneous
approach, new technology group 10.
XW0J3KA..................... Introduction of paclitaxel-coated balloon
technology, three balloons into coronary
artery, one artery, percutaneous
approach, new technology group 10.
XW0J3LA..................... Introduction of paclitaxel-coated balloon
technology, four or more balloons into
coronary artery, one artery, percutaneous
approach, new technology group 10.
XW0K3HA..................... Introduction of paclitaxel-coated balloon
technology, one balloon into coronary
artery, two arteries, percutaneous
approach, new technology group 10.
XW0K3JA..................... Introduction of paclitaxel-coated balloon
technology, two balloons into coronary
artery, two arteries, percutaneous
approach, new technology group 10.
XW0K3KA..................... Introduction of paclitaxel-coated balloon
technology, three balloons into coronary
artery, two arteries, percutaneous
approach, new technology group 10.
XW0K3LA..................... Introduction of paclitaxel-coated balloon
technology, four or more balloons into
coronary artery, two arteries,
percutaneous approach, new technology
group 10.
XW0L3HA..................... Introduction of paclitaxel-coated balloon
technology, one balloon into coronary
artery, three arteries, percutaneous
approach, new technology group 10.
XW0L3JA..................... Introduction of paclitaxel-coated balloon
technology, two balloons into coronary
artery, three arteries, percutaneous
approach, new technology group 10.
XW0L3KA..................... Introduction of paclitaxel-coated balloon
technology, three balloons into coronary
artery, three arteries, percutaneous
approach, new technology group 10.
XW0K3LA..................... Introduction of paclitaxel-coated balloon
technology, four or more balloons into
coronary artery, two arteries,
percutaneous approach, new technology
group 10.
XW0L3HA..................... Introduction of paclitaxel-coated balloon
technology, one balloon into coronary
artery, three arteries, percutaneous
approach, new technology group 10.
XW0L3JA..................... Introduction of paclitaxel-coated balloon
technology, two balloons into coronary
artery, three arteries, percutaneous
approach, new technology group 10.
XW0L3KA..................... Introduction of paclitaxel-coated balloon
technology, three balloons into coronary
artery, three arteries, percutaneous
approach, new technology group 10.
XW0M3LA..................... Introduction of paclitaxel-coated balloon
technology, four or more balloons into
coronary artery, four or more arteries,
percutaneous approach, new technology
group 10.
------------------------------------------------------------------------
For FY 2026, we received a request to reconsider the designation
and MS-DRG assignment of the previously listed 16 procedure codes.
Specifically, the requestor (the manufacturer) requested that the
procedure codes be designated as O.R. procedures and assigned to the
following surgical MS-DRGs:
MS-DRG 250 Percutaneous Cardiovascular Procedures without
Intraluminal Device with MCC
MS-DRG 251 Percutaneous Cardiovascular Procedures without
Intraluminal Device without MCC
MS-DRG 321 Percutaneous Cardiovascular Procedures with
Intraluminal Device with MCC or 4+ Arteries/Intraluminal Devices
MS-DRG 322 Percutaneous Cardiovascular Procedures with
Intraluminal Device without MCC
MS-DRG 323 Coronary Intravascular Lithotripsy with
Intraluminal Device with MCC
MS-DRG 324 Coronary Intravascular Lithotripsy with
Intraluminal Device without MCC
MS-DRG 325 Coronary Intravascular Lithotripsy without
Intraluminal Device
According to the requestor, the root operation CMS identified as
the most appropriate (that is, Introduction in the Administration
section), and the predecessor code selected, (procedure code 3E073GC
(Introduction of other therapeutic substance into coronary artery,
percutaneous approach)), only involves a therapeutic substance being
delivered via infusion or injection. The requestor stated that the
procedure to administer the paclitaxel via the drug coated balloon
(DCB) catheter is a surgical procedure as described in the instructions
for use, with the drug delivery occurring using controlled prolonged
balloon inflation during which the patient is monitored for signs of
ischemia or arrythmia. The requestor stated that the procedure to
deliver the paclitaxel is more appropriate as an O.R. procedure than a
non-O.R. procedure. The requestor acknowledged that while the MS-DRG
assignment for existing percutaneous coronary intervention (PCI)
procedures is driven by vessel preparation or the use of an
intraluminal device, it should not preclude the designation of the
procedure codes identifying use of an AGENTTM Paclitaxel-
Coated Balloon Catheter technology that describes the
[[Page 18062]]
delivery of the paclitaxel to the coronary vessel(s) as O.R.
procedures.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69095 through
69096), we stated that under our established process, we reviewed the
predecessor code and MS-DRG assignment most closely associated with the
new procedure codes. We noted that because the procedure codes
describing the use of an AGENTTM Paclitaxel-Coated Balloon
Catheter are describing delivery of the paclitaxel to the coronary
vessel(s), the predecessor code is 3E073GC, which is designated as a
non-O.R. procedure and does not affect MS-DRG assignment. We also
stated that, as discussed at the March 19, 2024, ICD-10 Coordination
and Maintenance Committee meeting and in the commenters' feedback, a
preparatory step (that is, vessel preparation by either angioplasty,
atherectomy, or lithotripsy) is required to be performed first, before
the AGENTTM Paclitaxel-Coated Balloon Catheter is deployed.
We noted that each type of vessel preparation procedure is designated
as an O.R. procedure and maps to one of the previously listed surgical
MS-DRGs. We also noted that based on the surgical hierarchy, the
reporting of one of the vessel preparation steps (that is, angioplasty,
atherectomy, or lithotripsy), or placement of a new stent in connection
with the use of the AGENTTM Paclitaxel-Coated Balloon
Catheter would result in assignment to one of the previously listed
surgical MS-DRGs. We noted that use of the AGENTTM
Paclitaxel-Coated Balloon Catheter to deliver the paclitaxel to the
coronary vessel(s) cannot occur in the absence of a surgical vessel
preparation and therefore, it is the vessel preparation procedure that
will determine the surgical MS-DRG assignment to one of the previously
listed surgical MS-DRGs.
We reviewed the instructions for use submitted by the requestor
regarding the procedure to insert the drug-coated balloon catheter. The
instructions for use state:
Note: For optimal DCB results, adequate lesion preparation is
essential. This should include predilatation with a non-coated
coronary balloon. Intravascular imaging to guide lesion preparation
and to assess the adequacy of the final result is strongly
recommended.
Caution: Lesion preparation is necessary to prevent delamination
of the balloon's drug coating while traversing patient anatomy. The
TransPax coating is designed to facilitate drug transfer into the
vessel wall upon contact. Do not use the AGENT Drug-Coated Balloon
Catheter for lesion preparation.
We also note that the FDA-approved indication states, ``The
AGENTTM Paclitaxel-Coated Balloon Catheter is intended to be
used after appropriate vessel preparation in adult patients undergoing
percutaneous coronary intervention (PCI) in coronary arteries 2.0 mm to
4.0 mm in diameter and lesions up to 26 mm in length for the purpose of
improving myocardial perfusion when treating in-stent restenosis
(ISR).'' We further note that, as reflected in the March 19, 2024, ICD-
10 Coordination and Maintenance Committee meeting materials, ``The
AGENTTM Drug-Coated Balloon (DCB) has been designated by the
FDA as an implant for PMA purposes. Per FDA guidance, the drug
component is considered a permanent implant because it remains in the
body for greater than 30 days.''
As such, we continue to disagree with designating the procedure to
delivery paclitaxel to a coronary vessel as identified by any one of
the previously listed 16 procedure codes as O.R. procedures. As stated
earlier in this section, the MS-DRG assignment is dependent on the
surgical vessel preparation procedure that would be reported when the
AGENTTM Paclitaxel-Coated Balloon Catheter technology is
used to deliver the paclitaxel to the coronary vessel(s) and result in
assignment to one of the previously listed surgical MS-DRGs. We refer
the reader to the ICD-10 MS-DRG Definitions Manual, Version 42.1
available in association with this FY 2026 IPPS/LTCH PPS proposed rule
on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps for complete documentation of the
GROUPER logic for the previously listed surgical MS-DRGs under MDC 05.
For the reasons discussed, we are maintaining the designation of the 16
procedure codes describing use of the AGENTTM Paclitaxel-
Coated Balloon Catheter technology as non-O.R. for FY 2026.
(3) Endoscopic Drainage of the Ureter With Drainage Device
During our internal review, we noted that procedure codes that
describe drainage of the ureter with a drainage device, via a natural
or artificial opening endoscopic approach, are not recognized as O.R.
procedures for purposes of MS-DRG assignment. We identified the
following three related codes:
------------------------------------------------------------------------
ICD-10-PCS code Description
------------------------------------------------------------------------
0T9680Z..................... Drainage of right ureter with drainage
device, via natural or artificial opening
endoscopic.
0T9780Z..................... Drainage of left ureter with drainage
device, via natural or artificial opening
endoscopic.
0T9880Z..................... Drainage of bilateral ureters with
drainage device, via natural or
artificial opening endoscopic.
------------------------------------------------------------------------
Upon further review and consideration, we believe that procedure
codes 0T9680Z, 0T9780Z, and 0T9880Z that describe the drainage of the
ureter with a drainage device via a natural or artificial opening
endoscopic approach warrant designation as O.R. procedures. These
procedures involve the use of a cystoscope and include the insertion of
a small tube (called a ureteral stent or drainage tube) into one or
both of the ureters (the tubes that carry urine from the kidneys to the
bladder) to drain urine from a blocked or partially blocked ureter and
must be performed by a urologist who specializes in diagnosing and
treating conditions of the urinary tract, genitals, and adrenal glands
through surgery. These procedures are typically performed in an
operating room under anesthesia, can take about 30 minutes or more,
including preparation time, and require that a patient's vital signs be
monitored by the health care team for the duration of the procedure.
Therefore, we are proposing to add procedure codes 0T9680Z,
0T9780Z, and 0T9880Z to the FY 2026 ICD-10 MS-DRG Version 43
Definitions Manual in Appendix E--Operating Room Procedures and
Procedure Code/MS-DRG Index as O.R. procedures assigned to MS-DRG 264
(Other Circulatory System O.R. Procedures) in MDC 05 (Diseases and
Disorders of the Circulatory System); MS-DRGs 656, 657, and 658 (Kidney
and Ureter Procedures for Neoplasm, with MCC, with CC, and without CC/
MCC, respectively) and MS-DRGs 659, 660, and 661 (Kidney and Ureter
Procedures for Non-Neoplasm, with MCC, with CC, and without CC/MCC,
respectively) in
[[Page 18063]]
MDC 11 (Diseases and Disorders of the Kidney and Urinary Tract); MS-
DRGs 907, 908, and 909 (Other O.R. Procedures for Injuries with MCC,
with CC, and without CC/MCC, respectively) in MDC 21 (Injuries,
Poisonings and Toxic Effects of Drugs); and MS-DRGs 957, 958, and 959
(Other O.R. Procedures for Multiple Significant Trauma with MCC, with
CC, and without CC/MCC, respectively) in MDC 24 (Multiple Significant
Trauma).
8. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2026
a. Background of the CC List and the CC Exclusions List
Under the IPPS MS-DRG classification system, we have developed a
standard list of diagnoses that are considered CCs. Historically, we
developed this list using physician panels that classified each
diagnosis code based on whether the diagnosis, when present as a
secondary condition, would be considered a substantial complication or
comorbidity. A substantial complication or comorbidity was defined as a
condition that, because of its presence with a specific principal
diagnosis, would cause an increase in the length-of-stay by at least 1
day in at least 75 percent of the patients. However, depending on the
principal diagnosis of the patient, some diagnoses on the basic list of
complications and comorbidities may be excluded if they are closely
related to the principal diagnosis. In FY 2008, we evaluated each
diagnosis code to determine its impact on resource use and to determine
the most appropriate CC subclassification (NonCC, CC, or MCC)
assignment. We refer readers to sections II.D.2. and 3. of the preamble
of the FY 2008 IPPS final rule with comment period for a discussion of
the refinement of CCs in relation to the MS DRGs we adopted for FY 2008
(72 FR 47152 through 47171).
b. Overview of Comprehensive CC/MCC Analysis
In the FY 2008 IPPS/LTCH PPS final rule (72 FR 47159), we described
our process for establishing three different levels of CC severity into
which we would subdivide the diagnosis codes. The categorization of
diagnoses as an MCC, a CC, or a NonCC was accomplished using an
iterative approach in which each diagnosis was evaluated to determine
the extent to which its presence as a secondary diagnosis resulted in
increased hospital resource use. We refer readers to the FY 2008 IPPS/
LTCH PPS final rule (72 FR 47159) for a complete discussion of our
approach. Since the comprehensive analysis was completed for FY 2008,
we have evaluated diagnosis codes individually when assigning severity
levels to new codes and when receiving requests to change the severity
level of specific diagnosis codes.
We noted in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235
through 19246) that with the transition to ICD-10-CM and the
significant changes that have occurred to diagnosis codes since the FY
2008 review, we believed it was necessary to conduct a comprehensive
analysis once again. Based on this analysis, we proposed changes to the
severity level designations for 1,492 ICD-10-CM diagnosis codes and
invited public comments on those proposals. As summarized in the FY
2020 IPPS/LTCH PPS final rule, many commenters expressed concern with
the proposed severity level designation changes overall and recommended
that CMS conduct further analysis prior to finalizing any proposals.
After careful consideration of the public comments we received, as
discussed further in the FY 2020 IPPS/LTCH PPS final rule, we generally
did not finalize our proposed changes to the severity designations for
the ICD-10-CM diagnosis codes, other than the changes to the severity
level designations for the diagnosis codes in category Z16 (Resistance
to antimicrobial drugs) from a NonCC to a CC. We stated that postponing
adoption of the proposed comprehensive changes in the severity level
designations would allow further opportunity to provide additional
background to the public on the methodology utilized and clinical
rationale applied across diagnostic categories to assist the public in
its review. We refer readers to the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42150 through 42152) for a complete discussion of our response
to public comments regarding the proposed severity level designation
changes for FY 2020.
As discussed in the FY 2021 IPPS/LTCH PPS proposed rule (85 FR
32550), to provide the public with more information on the CC/MCC
comprehensive analysis discussed in the FY 2020 IPPS/LTCH PPS proposed
and final rules, CMS hosted a listening session on October 8, 2019. The
listening session included a review of this methodology utilized to
mathematically measure the impact on resource use. We refer readers to
https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/Downloads/10082019ListingSessionTrasncriptandQandAsandAudioFile.zip for
the transcript and audio file of the listening session. We also refer
readers to https://www.cms.gov/Medicare/MedicareFee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.html for
the supplementary file containing the mathematical data generated using
claims from the FY 2018 MedPAR file describing the impact on resource
use of specific ICD-10-CM diagnosis codes when reported as a secondary
diagnosis that was made available for the listening session.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58550 through
58554), we discussed our plan to continue a comprehensive CC/MCC
analysis, using a combination of mathematical analysis of claims data
as discussed in the FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235)
and the application of nine guiding principles and plan to present the
findings and proposals in future rulemaking. The nine guiding
principles are as follows:
Represents end of life/near death or has reached an
advanced stage associated with systemic physiologic decompensation and
debility.
Denotes organ system instability or failure.
Involves a chronic illness with susceptibility to
exacerbations or abrupt decline.
Serves as a marker for advanced disease states across
multiple different comorbid conditions.
Reflects systemic impact.
Post-operative/post-procedure condition/complication
impacting recovery.
Typically requires higher level of care (that is,
intensive monitoring, greater number of caregivers, additional testing,
intensive care unit care, extended length of stay).
Impedes patient cooperation or management of care or both.
Recent (last 10 years) change in best practice, or in
practice guidelines and review of the extent to which these changes
have led to concomitant changes in expected resource use.
We refer readers to the FY 2021 IPPS/LTCH PPS final rule for a
complete summation of the comments we received for each of the nine
guiding principles and our responses to those comments.
In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25175 through
25180), as another interval step in our comprehensive review of the
severity designations of ICD-10-CM diagnosis codes, we requested public
comments on a potential change to the severity level designations for
``unspecified'' ICD-10-CM diagnosis codes that we
[[Page 18064]]
were considering adopting for FY 2022. Specifically, we noted we were
considering changing the severity level designation of ``unspecified''
diagnosis codes to a NonCC where there are other codes available in
that code subcategory that further specify the anatomic site. As
summarized in the FY 2022 IPPS/LTCH PPS final rule, many commenters
expressed concern with the potential severity level designation changes
overall and recommended that CMS delay any possible change to the
designation of these codes to give hospitals and their physicians time
to prepare. After careful consideration of the public comments we
received, we maintained the severity level designation of the
``unspecified'' diagnosis codes currently designated as a CC or MCC
where there are other codes available in that code subcategory that
further specify the anatomic site for FY 2022. We refer readers to the
FY 2022 IPPS/LTCH PPS final rule (86 FR 44916 through 44926) for a
complete discussion of our response to public comments regarding the
potential severity level designation changes. Instead, for FY 2022, we
finalized a new Medicare Code Editor (MCE) code edit for
``unspecified'' codes, effective with discharges on and after April 1,
2022. We stated we believe finalizing this new edit would provide
additional time for providers to be educated while not affecting the
payment the provider is eligible to receive. We refer the reader to
section II.D.14.e. of the preamble of the FY 2022 IPPS/LTCH PPS final
rule (86 FR 44940 through 44943) for the complete discussion.
As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48866),
we stated that as the new unspecified edit became effective beginning
with discharges on and after April 1, 2022, we believed it was
appropriate to not propose to change the designation of any ICD-10-CM
diagnosis codes, including the unspecified codes that are subject to
the ``Unspecified Code'' edit, as we continue our comprehensive CC/MCC
analysis to allow interested parties the time needed to become
acclimated to the new edit.
In the FY 2023 IPPS/LTCH proposed rule (87 FR 28177 through 28181),
we also requested public comments on how the reporting of diagnosis
codes in categories Z55-Z65 might improve our ability to recognize
severity of illness, complexity of illness, and/or utilization of
resources under the MS-DRGs. We stated we were also interested in
receiving feedback on how we might otherwise foster the documentation
and reporting of the diagnosis codes describing social and economic
circumstances to more accurately reflect each health care encounter and
improve the reliability and validity of the coded data.
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58755 through
58759), based on our analysis of the impact on resource use for the
ICD-10-CM Z codes that describe homelessness and after consideration of
public comments, we finalized changes to the severity levels for
diagnosis codes Z59.00 (Homelessness, unspecified), Z59.01 (Sheltered
homelessness), and Z59.02 (Unsheltered homelessness), from NonCC to CC.
We stated our expectation that finalizing the changes would encourage
the increased documentation and reporting of the diagnosis codes
describing social and economic circumstances and serve as an example
for providers that, when they document and report SDOH codes, CMS can
further examine the claims data and consider future changes to the
designation of these codes when reported as a secondary diagnosis. We
further stated CMS would continue to monitor and evaluate the reporting
of the diagnosis codes describing social and economic circumstances.
In the FY 2025 proposed rule (89 FR 35995), we noted that since the
FY 2021 IPPS/LTCH PPS final rule we have continued to solicit feedback
regarding the nine guiding principles, as well as other possible ways
we can incorporate meaningful indicators of clinical severity. We
stated we had encouraged the public to provide a detailed explanation
of how applying a suggested concept or principle would ensure that the
severity designation appropriately reflects resource use for any
diagnosis code when providing feedback or comments. We also noted in
the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26748 through 26750) we
illustrated how the nine guiding principles might be applied in
evaluating changes to the severity designations of diagnosis codes in
our discussion of our proposed changes to the severity level
designation for certain diagnosis codes that describe homelessness.
After consideration of the ongoing feedback and comments we had
received, we proposed to finalize the nine guiding principles. After
consideration of the public comments received, and for the reasons
discussed, we finalized the nine guiding principles as listed
previously in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69076 through
69078). Accordingly, we stated that our evaluations to determine the
extent to which the presence of a diagnosis code as a secondary
diagnosis results in increased hospital resource use will include a
combination of mathematical analysis of claims data as discussed in the
FY 2020 IPPS/LTCH PPS proposed rule (84 FR 19235) and the application
of the nine guiding principles.
Additionally, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69079
through 69084), based on our analysis of the impact on resource use for
the ICD-10-CM diagnosis codes that describe inadequate housing and
housing instability, and after consideration of public comments, we
finalized changes to the severity levels for seven diagnosis codes for
FY 2025.
For this FY 2026 IPPS/LTCH PPS proposed rule, we did not receive
any requests to change the severity level designations of specific ICD-
10-CM diagnosis codes. At this time, we believe it is appropriate to
continue to formulate future next steps in our comprehensive review of
the severity designations of ICD-10-CM diagnosis codes, rather than
proposing to change the designation of individual ICD-10-CM diagnosis
codes. Therefore, we are not proposing any severity designation changes
for FY 2026.
As we continue our comprehensive CC/MCC analysis, we may consider
proposing changes for other diagnosis codes in the future based on our
analysis of the impact on resource use, per our methodology, as
previously described, and consideration of the guiding principles
consistent with our annual process and will provide more detail in
future rulemaking. We have updated the Impact on Resource Use Files on
the CMS website so that the public can review the mathematical data for
the impact on resource use generated using claims from the FY 2019
through the FY 2024 MedPAR files. These files are posted on the CMS
website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software.
For new diagnosis codes approved for FY 2026, consistent with our
annual process for designating a severity level (MCC, CC, or NonCC) for
new diagnosis codes, we first review the predecessor code designation,
followed by review and consideration of other factors that may be
relevant to the severity level designation, including the severity of
illness, treatment difficulty, complexity of service and the resources
utilized in the diagnosis or treatment of the condition. We note that
this process does not automatically result in the new diagnosis code
having the same designation as the predecessor code. We refer the
reader to section II.C.9 of the preamble of this FY 2026 IPPS/LTCH
[[Page 18065]]
PPS proposed rule for the discussion of the proposed changes to the
ICD-10-CM and ICD-10-PCS coding systems for FY 2026.
c. Proposed Additions and Deletions to the Diagnosis Code Severity
Levels for FY 2026
The following tables identify the proposed additions and deletions
to the diagnosis code MCC severity levels list and the proposed
additions and deletions to the diagnosis code CC severity levels list
for FY 2026 and are available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html:
Table 6I.1--Proposed Additions to the MCC List--FY 2026;
Table 6I.2--Proposed Deletions to the MCC List--FY 2026;
Table 6J.1--Proposed Additions to the CC List--FY 2026;
and
Table 6J.2--Proposed Deletions to the CC List--FY 2026.
d. Proposed CC Exclusions List for FY 2026
In the September 1, 1987, final notice (52 FR 33143) concerning
changes to the DRG classification system, we modified the GROUPER logic
so that certain diagnoses included on the standard list of CCs would
not be considered valid CCs in combination with a particular principal
diagnosis. We created the CC Exclusions List for the following reasons:
(1) to preclude coding of CCs for closely related conditions; (2) to
preclude duplicative or inconsistent coding from being treated as CCs;
and (3) to ensure that cases are appropriately classified between the
complicated and uncomplicated DRGs in a pair.
In the May 19, 1987, proposed notice (52 FR 18886) and the
September 1, 1987, final notice (52 FR 33154), we explained that the
excluded secondary diagnoses were established using the following five
principles:
Chronic and acute manifestations of the same condition
should not be considered CCs for one another;
Specific and nonspecific (that is, not otherwise specified
(NOS)) diagnosis codes for the same condition should not be considered
CCs for one another;
Codes for the same condition that cannot coexist, such as
partial/total, unilateral/bilateral, obstructed/unobstructed, and
benign/malignant, should not be considered CCs for one another;
Codes for the same condition in anatomically proximal
sites should not be considered CCs for one another; and
Closely related conditions should not be considered CCs
for one another.
The creation of the CC Exclusions List was a major project
involving hundreds of codes. We have continued to review the remaining
CCs to identify additional exclusions and to remove diagnoses from the
master list that have been shown not to meet the definition of a CC. We
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50541
through 50544) for detailed information regarding revisions that were
made to the CC and CC Exclusion Lists under the ICD-9-CM MS-DRGs.
The ICD-10 MS-DRGs Version 42.1 CC Exclusion List is included as
Appendix C in the ICD-10 MS-DRG Definitions Manual (available on the
CMS website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/ms-drg-classifications-and-software) and includes three lists identified as Part 1, Part 2 and
Part 3. Part 1 is the list of all diagnosis codes that are defined as a
CC or MCC when reported as a secondary diagnosis. For all diagnosis
codes on the list, a link is provided to a collection of diagnosis
codes which, when reported as the principal diagnosis, would cause the
CC or MCC diagnosis to be considered as a NonCC. Part 2 is the list of
diagnosis codes designated as an MCC only for patients discharged
alive; otherwise, they are assigned as a NonCC. Part 3 is the list of
diagnosis codes that are designated as a CC or MCC and included in the
definition of the logic for the listed MS-DRGs. When reported as a
secondary diagnosis and grouped to one of the listed MS-DRGs, the
diagnosis is excluded from acting as a CC/MCC for severity in DRG
assignment (that is, suppression logic).
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69093), we stated
that, because commenters had raised concerns regarding the principal
diagnoses listed under Part 1 of Appendix C--CC Exclusions List in
Principal Diagnosis Collection Lists 1379 and 1380 that exclude
diagnosis codes N18.5 (Chronic kidney disease, stage 5) and N18.6 (End
stage renal disease) from acting as a CC or MCC under the CC exclusion
logic in accordance with the list of five principles established in
1987, we intended to perform a broad review of the conditions in these
lists to determine if any modifications are warranted and to ensure
they continue to be clinically appropriate. We note that the Principal
Diagnosis Collection List numbers may change because of updates that
are made to the list annually through rulemaking. Therefore, while
under Version 41.1 the principal diagnoses listed in Principal
Diagnosis Collection List numbers 1379 and 1380 exclude diagnosis codes
N18.5 and N18.6 from acting as a CC or MCC, under Version 42.1, the
principal diagnoses listed in Principal Diagnosis Collection List
numbers 1330 and 1331 exclude diagnosis codes N18.5 and N18.6 from
acting as a CC or MCC. Accordingly, we reviewed the list of principal
diagnosis codes listed in Principal Diagnosis Collection List numbers
1330 and 1331 that exclude diagnosis codes N18.5 and N18.6 from acting
as a CC or MCC to assess clinical appropriateness.
The findings from our review indicate several of the listed
conditions, when reported as a principal diagnosis, are not applicable
to exclude the designated N18.5 or N18.6 secondary CC/MCC diagnosis
code under application of our five established principles finalized in
the September 1, 1987, final notice (52 FR 33154) previously discussed.
For example, diagnosis codes describing diabetes with other specified
complications such as arthropathy, periodontal disease, or a foot
ulcer, and diagnosis codes describing endometriosis, are not chronic
and acute manifestations of, or closely related conditions to, chronic
kidney disease, stage 5 (code N18.5) or end stage renal disease (code
N18.6), nor are they describing codes for the same condition that
cannot coexist.
As previously described, the Principal Diagnosis Collection List
numbers may change because of updates that are made to the list
annually through rulemaking. We note that, under proposed Version 43,
the proposed Principal Diagnosis Collection List number to exclude
diagnosis codes N18.5 and N18.6 from acting as a CC or MCC is 1335. We
are therefore proposing to remove the diagnosis codes listed in Table
6P.8a associated with this FY 2026 IPPS/LTCH PPS proposed rule and
available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps from Principal
Diagnosis Collection List number 1335 under proposed Version 43.
Findings from our internal review also indicated that diagnosis code
I12.9 (Hypertensive chronic kidney disease with stage 1 through stage 4
chronic kidney disease, or unspecified chronic kidney disease) is
currently listed in Principal Diagnosis Collection List number 1331 and
excludes diagnosis code N18.6 from acting as an MCC, however, diagnosis
code I12.9 is not currently listed in the Principal Diagnosis
Collection List number 1330 to exclude diagnosis code
[[Page 18066]]
N18.5. We believe it is clinically appropriate to add diagnosis code
I12.9 to Principal Diagnosis Collection List number 1335 under Version
43 because it would not be expected that a secondary diagnosis of N18.5
would be reported with a principal diagnosis of I12.9. During our
internal review we also identified diagnosis code I13.0 (Hypertensive
heart and chronic kidney disease with heart failure and stage 1 through
stage 4 chronic kidney disease, or unspecified chronic kidney disease)
and diagnosis code I13.10 (Hypertensive heart and chronic kidney
disease without heart failure, with stage 1 through stage 4 chronic
kidney disease, or unspecified chronic kidney disease) that we believe
are appropriate to add to Principal Diagnosis Collection List number
1335 to exclude diagnosis codes N18.5 and N18.6 from acting as a CC/MCC
when reported because the conditions describe chronic kidney disease,
stage 5 and end stage renal disease (ESRD) and it would not be
clinically appropriate to have a principal diagnosis describing stage 1
through stage 4 chronic kidney disease reported with chronic kidney
disease, stage 5 or ESRD.
In summary, we are proposing to add diagnosis code I12.9 to
Principal Diagnosis Collection List number 1335 to exclude diagnosis
code N18.5 from acting as a CC, proposing to remove the diagnosis codes
listed in Table 6P.8a associated with this FY 2026 IPPS/LTCH PPS
proposed rule and available via the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps from
Principal Diagnosis Collection List number 1335, and proposing to add
diagnosis codes I13.0 and I13.10 to Principal Diagnosis Collection List
number 1335 to exclude diagnosis codes N18.5 and N18.6 from acting as a
CC/MCC.
We intend to continue this type of internal review to ensure all
the other Principal Diagnosis Collection lists reflect the appropriate
codes in connection with the CC/MCC secondary diagnosis code that is
excluded from acting as a CC/MCC. Any proposed changes to the lists
will be discussed in future rulemaking. To inform future rulemaking,
feedback and other suggestions may be submitted by October 20, 2025,
and directed to MEARISTM at: https://mearis.cms.gov/public/home.
We also performed an internal review of the diagnoses listed in
Appendix C--Part 2: Codes That are Major CC Only if Patient Discharged
Alive. The diagnoses listed in Part 2 of Appendix C are assigned as an
MCC only for patients discharged alive, otherwise the codes are
assigned as a NonCC. The diagnoses listed in Part 2 in Version 42.1 are
shown in the following table.
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
I46.2............................. Cardiac arrest due to underlying
cardiac condition.
I46.8............................. Cardiac arrest due to other
underlying condition.
I46.9............................. Cardiac arrest, cause unspecified.
I49.01............................ Ventricular fibrillation.
R09.2............................. Respiratory arrest.
R57.0............................. Cardiogenic shock.
R57.1............................. Hypovolemic shock.
R57.8............................. Other shock.
------------------------------------------------------------------------
In developing Appendix C--Part 2: Codes That are Major CC Only if
Patient Discharged Alive (72 FR 47161 through 47168), the claims data
were evaluated to determine if there was a difference in resource use
between cases in which the patient was discharged alive or died during
the hospital stay. For most secondary diagnoses, the charges were
similar for the two groups. There were, however, a few diagnoses where
the difference in charges and clinical considerations supported a
different CC designation for patients who died before discharge. For
these diagnoses, the patients who were discharged alive required
significantly more hospital resources than the patients who died.
Therefore, when reported as a secondary diagnosis, each of the
diagnoses is designated as an MCC in cases where the patient is
discharged alive and as a NonCC in cases where the patient died.
We analyzed claims data from the September 2024 update of the FY
2024 MedPAR file for the diagnoses currently listed in Appendix C--Part
2. Our findings are reflected in the following table:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Patient discharged alive (without discharge Patient expired (with discharge status 20)
status 20) -----------------------------------------------
ICD-10-CM code Description ------------------------------------------------
Number of Number of Avg LOS Average cost
cases Avg LOS Average cost cases
--------------------------------------------------------------------------------------------------------------------------------------------------------
I46.2.................... Cardiac arrest due to 8,241 11.6 $61,108 5,766 5.3 $33,173
underlying cardiac condition.
I46.8.................... Cardiac arrest due to other 3,884 15.6 62,505 6,133 5.8 25,979
underlying condition.
I46.9.................... Cardiac arrest, cause 13,121 13.3 59,732 28,437 5.2 24,933
unspecified.
I49.01................... Ventricular fibrillation..... 10,705 9.9 52,118 6,788 4.6 28,949
R09.2.................... Respiratory arrest........... 367 8.7 33,536 375 5.5 17,280
R57.0.................... Cardiogenic shock............ 46,537 12.5 58,432 23,335 6.8 39,457
R57.1.................... Hypovolemic shock............ 32,614 10.8 39,051 6,476 8.3 38,697
R57.8.................... Other shock.................. 37,728 12.4 50,374 11,570 8.4 43,215
--------------------------------------------------------------------------------------------------------------------------------------------------------
As shown in the table, the data reflect that most of the conditions
currently listed in Appendix C--Part 2, utilize hospital resources as
expected, with the patients who were discharged alive (without
discharge status 20) requiring significantly more hospital resources
than the patients who expired (with discharge status 20), as
demonstrated by the longer lengths of stay and higher average costs of
these cases. We note however, that the resource utilization for cases
reporting R57.1 (Hypovolemic shock) as a secondary diagnosis appear to
be comparable whether the patient
[[Page 18067]]
was discharged alive or the patient expired. As reflected in the table,
the claims data from the September 2024 update of the FY 2024 MedPAR
file reflect that code R57.1 was reported as a secondary diagnosis in
32,614 cases where the patient was discharged alive. These cases had
average costs of $39,051 and an average length of stay of 10.8 days. In
the 6,476 cases where R57.1 was reported as a secondary diagnosis and
the patient expired, the average costs were slightly lower ($38,697
versus $39,051) and the average length of stay was slightly shorter
(8.3 days versus 10.8 days). We reviewed this issue and note
clinically, the recommended treatment for hypovolemic shock is
immediate intervention with fluid resuscitation with intravenous (IV)
fluids, blood transfusions, and vasoactive drugs. Hypovolemic shock
generally has a lower mortality rate and responds to timely treatment.
As the claims data no longer reflect that patients reporting
hypovolemic shock as secondary diagnosis that are discharged alive
require significantly more hospital resources than the patients who
expire, we are proposing to remove code R57.1 from the list found in
Appendix C--Part 2: Codes That are Major CC Only if Patient Discharged
Alive. Under this proposal, when reported as a secondary diagnosis,
R57.1 (Hypovolemic shock) will be assigned as an MCC when the patient
is discharged alive or if the patient expires.
Based on our review, we considered if it was appropriate to add
other diagnosis codes describing shock to Appendix C--Part 2.
Specifically, we considered code T79.4XXA (Traumatic shock, initial
encounter). ICD-10-CM diagnosis code T79.4XXA is currently designated
as an MCC when reported as secondary diagnoses. Traumatic shock
represents a unique pathological condition that begins with multiple,
usually blunt, trauma and may conclude with acute respiratory distress
syndrome, coagulopathy, sepsis, multiple organ dysfunction syndrome and
death.
We analyzed claims data from the September 2024 update of the FY
2024 MedPAR file for cases reporting T79.4XXA as a secondary diagnosis
and our findings are reflected in the following table:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Patient discharged alive (without discharge Patient expired (with discharge status 20)
status 20) -----------------------------------------------
ICD-10-CM code Description ------------------------------------------------
Number of Number of Avg LOS Average cost
cases Avg LOS Average cost cases
--------------------------------------------------------------------------------------------------------------------------------------------------------
T79.4XXA................. Traumatic shock, initial 1,187 16.1 $79,218 553 6.5 $48,880
encounter.
--------------------------------------------------------------------------------------------------------------------------------------------------------
As reflected in the table, the claims data from the September 2024
update of the FY 2024 MedPAR file indicate that T79.4XXA was reported
as a secondary diagnosis in 1,187 cases where the patient was
discharged alive. These cases had average costs of $79,218 and an
average length of stay of 16.1 days. In the 553 cases where T79.4XXA
was reported as a secondary diagnosis and the patient expired, the
average costs were considerably lower ($48,880 versus $79,218) and the
average length of stay was much shorter (6.5 days versus 16.1 days).
As the data reflect that cases reporting traumatic shock, initial
encounter, as a secondary diagnosis for patients that are discharged
alive require significantly more hospital resources than the patients
who expire, we are proposing to add code T79.4XXA to the list found in
Appendix C--Part 2: Codes That are Major CC Only if Patient Discharged
Alive. Under this proposal, when reported as a secondary diagnosis,
T79.4XXA (Traumatic shock, initial encounter) would be assigned as an
MCC only when the patient is discharged alive.
We are proposing changes to the ICD-10 MS-DRGs Version 43 CC
Exclusion List based on the diagnosis code updates as discussed in
section II.C.13. of the preamble of this FY 2026 IPPS/LTCH PPS proposed
rule. Therefore, we have developed Table 6G.1.--Proposed Secondary
Diagnosis Order Additions to the CC Exclusions List--FY 2026; Table
6G.2.--Proposed Principal Diagnosis Order Additions to the CC
Exclusions List--FY 2026; Table 6H.1.--Proposed Secondary Diagnosis
Order Deletions to the CC Exclusions List--FY 2026; and Table 6H.2.--
Proposed Principal Diagnosis Order Deletions to the CC Exclusions
List--FY 2026. For Table 6G.1, each secondary diagnosis code proposed
for addition to the CC Exclusion List is shown with an asterisk and the
principal diagnoses proposed to exclude the secondary diagnosis code
are provided in the indented column immediately following it. For Table
6G.2, each of the principal diagnosis codes for which there is a CC
exclusion is shown with an asterisk and the conditions proposed for
addition to the CC Exclusion List that will not count as a CC are
provided in an indented column immediately following the affected
principal diagnosis. For Table 6H.1, each secondary diagnosis code
proposed for deletion from the CC Exclusion List is shown with an
asterisk followed by the principal diagnosis codes that currently
exclude it. For Table 6H.2, each of the principal diagnosis codes is
shown with an asterisk and the proposed deletions to the CC Exclusions
List are provided in an indented column immediately following the
affected principal diagnosis. Tables 6G.1., 6G.2., 6H.1., and 6H.2.
associated with this FY 2026 IPPS/LTCH PPS proposed rule are available
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
9. Proposed Changes to the ICD-10-CM and ICD-10-PCS Coding Systems
To identify new, revised, and deleted diagnosis and procedure
codes, for FY 2026, we have developed 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, and Table 6F.--Revised Procedure Code Titles for this FY 2026
IPPS/LTCH PPS proposed rule.
These tables are not published in the Addendum to this FY 2026
IPPS/LTCH PPS proposed rule, but are available on the CMS website at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as described in section VI. of the
Addendum to this FY 2026 IPPS/LTCH PPS proposed rule. As discussed in
section II.C.11. of the preamble of this FY 2026 IPPS/LTCH PPS proposed
rule, the code titles are adopted as part of the ICD-10 Coordination
and Maintenance Committee meeting process. Therefore, although we
publish the code titles in the IPPS proposed and final rules, they are
not subject to comment in the proposed or final rules.
We are proposing the MDC and MS-DRG assignments for the new
diagnosis codes and procedure codes as set forth in Table 6A.--New
Diagnosis Codes and Table 6B.--New Procedure Codes. In
[[Page 18068]]
addition, the proposed severity level designations for the new
diagnosis codes are set forth in Table 6A. and the proposed O.R. status
for the new procedure codes are set forth in Table 6B. Consistent with
our established process, we examined the MS-DRG assignment and the
attributes (severity level and O.R. status) of the predecessor
diagnosis or procedure code, as applicable, to inform our proposed
assignments and designations.
Specifically, we review the predecessor code and MS-DRG assignment
most closely associated with the new diagnosis or procedure code, and
in the absence of claims data, we consider other factors that may be
relevant to the MS-DRG assignment, including the severity of illness,
treatment difficulty, complexity of service and the resources utilized
in the diagnosis and/or treatment of the condition. We note that this
process does not automatically result in the new diagnosis or procedure
code being proposed for assignment to the same MS-DRG or to have the
same designation as the predecessor code.
We are making available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html
the following tables associated with this FY 2026 IPPS/LTCH PPS
proposed rule:
Table 6A.--New Diagnosis Codes--FY 2026;
Table 6B.--New Procedure Codes--FY 2026;
Table 6C.--Invalid Diagnosis Codes--FY 2026;
Table 6D.--Invalid Procedure Codes--FY 2026;
Table 6E.--Revised Diagnosis Code Titles--FY 2026;
Table 6F.--Revised Procedure Code Titles--FY 2026;
Table 6G.1.--Proposed Secondary Diagnosis Order Additions
to the CC Exclusions List--FY 2026;
Table 6G.2.--Proposed Principal Diagnosis Order Additions
to the CC Exclusions List--FY 2026;
Table 6H.1.--Proposed Secondary Diagnosis Order Deletions
to the CC Exclusions List--FY 2026;
Table 6H.2.--Proposed Principal Diagnosis Order Deletions
to the CC Exclusions List--FY 2026;
Table 6I.1.--Proposed Additions to the MCC List--FY 2026;
Table 6I.2.--Proposed Deletions to the MCC List--FY 2026;
Table 6J.1.--Proposed Additions to the CC List--FY 2026;
and
Table 6J.2.--Proposed Deletions to the CC List--FY 2026.
10. Proposed Changes to the Surgical Hierarchies
Some inpatient stays entail multiple surgical procedures, each one
of which, occurring by itself, could result in assignment of the case
to a different MS-DRG within the MDC to which the principal diagnosis
is assigned. Therefore, it is necessary to have a decision rule within
the GROUPER by which these cases are assigned to a single MS-DRG. The
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function.
Application of this hierarchy ensures that cases involving multiple
surgical procedures are assigned to the MS-DRG associated with the most
resource-intensive surgical class.
A surgical class can be composed of one or more MS-DRGs. For
example, in MDC 11, the surgical class ``kidney transplant'' consists
of a single MS-DRG (MS-DRG 652) and the class ``major bladder
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655).
Consequently, in many cases, the surgical hierarchy has an impact
on more than one MS-DRG. The methodology for determining the most
resource-intensive surgical class involves weighting the average
resources for each MS-DRG by frequency to determine the weighted
average resources for each surgical class. For example, assume surgical
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To
determine whether surgical class A should be higher or lower than
surgical class B in the surgical hierarchy, we would weigh the average
costs of each MS-DRG in the class by frequency (that is, by the number
of cases in the MS-DRG) to determine average resource consumption for
the surgical class. The surgical classes would then be ordered from the
class with the highest average resource utilization to that with the
lowest, with the exception of ``other O.R. procedures'' as discussed in
this FY 2026 IPPS/LTCH PPS proposed rule.
This methodology may occasionally result in assignment of a case
involving multiple procedures to the lower-weighted MS-DRG (in the
highest, most resource-intensive surgical class) of the available
alternatives. However, given that the logic underlying the surgical
hierarchy provides that the GROUPER search for the procedure in the
most resource-intensive surgical class, in cases involving multiple
procedures, this result is sometimes unavoidable.
We note that, notwithstanding the foregoing discussion, there are a
few instances when a surgical class with a lower average cost is
ordered above a surgical class with a higher average cost. For example,
the ``other O.R. procedures'' surgical class is uniformly ordered last
in the surgical hierarchy of each MDC in which it occurs, regardless of
the fact that the average costs for the MS-DRG or MS-DRGs in that
surgical class may be higher than those for other surgical classes in
the MDC. The ``other O.R. procedures'' class is a group of procedures
that are only infrequently related to the diagnoses in the MDC but are
still occasionally performed on patients with cases assigned to the MDC
with these diagnoses. Therefore, assignment to these surgical classes
should only occur if no other surgical class more closely related to
the diagnoses in the MDC is appropriate.
A second example occurs when the difference between the average
costs for two surgical classes is very small. We have found that small
differences generally do not warrant reordering of the hierarchy
because, as a result of reassigning cases on the basis of the hierarchy
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered
below it.
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69100), we stated
our intent to consider if the development of evaluation criteria would
be useful for future proposed modifications to the surgical hierarchy
for MS-DRGs that have meaningful changes to the clinical logic. We are
continuing to examine what factors should be taken into account as we
consider any future proposals. We welcome feedback and other
suggestions to be submitted via the Medicare Electronic Application
Request Information SystemTM (MEARISTM) at
https://mearis.cms.gov/public/home by October 20, 2025.
Based on the changes that we are proposing to make for FY 2026, as
discussed in section II.C. of the preamble of this FY 2026 IPPS/LTCH
PPS proposed rule, our proposal for Appendix D MS-DRG Surgical
Hierarchy by MDC and MS-DRG of the proposed ICD-10 MS-DRG Definitions
Manual Version 43 to modify the existing surgical hierarchy in MDC 05
and MDC 08 for FY 2026 is illustrated in the following tables. We note
that because the current methodology involves weighing the average
costs of each MS-DRG in the surgical class by
[[Page 18069]]
frequency (that is, by the number of cases in the MS-DRG) to determine
average resource consumption for the surgical class, that the surgical
hierarchy of other MS-DRGs in the MDC may need to be adjusted based on
the MS-DRG classification changes that are proposed to ensure that the
average weighted cost for each base MS-DRG in each MDC are
monotonically decreasing. We further note that the proposed Version 43
surgical hierarchy as illustrated in the following tables may be
subject to further modifications based on the finalized changes to the
MS-DRG classifications for FY 2026.
----------------------------------------------------------------------------------------------------------------
Current Proposed
version 42 version 43
surgical surgical
hierarchy hierarchy
----------------------------------------------------------------------------------------------------------------
MDC 05 (Diseases and Disorders of the Circulatory System)
----------------------------------------------------------------------------------------------------------------
Proposed New MS-DRG 209.................... Complex Aortic Arch Procedures..... N/A 1
MS-DRG 212................................. Concomitant Aortic and Mitral Valve 2 2
Procedures.
MS-DRG 215................................. Other Heart Assist System Implant.. 1 3
MS-DRGs 216-218............................ Cardiac Valve and Other Major 3 4
Cardiothoracic Procedures with
Cardiac Catheterization.
MS-DRGs 231-232............................ Coronary Bypass with PTCA.......... 4 5
MS-DRG 275................................. Cardiac Defibrillator Implant with 6 6
Cardiac Catheterization.
MS-DRG 317................................. Concomitant Left Atrial Appendage 5 7
Closure and Cardiac Ablation.
MS-DRGs 219-221............................ Cardiac Valve and Other Major 3 8
Cardiothoracic Procedures without
Cardiac Catheterization.
MS-DRGs 233-234............................ Coronary Bypass with Cardiac 4 9
Catheterization or Open Ablation.
Proposed New MS-DRG 213.................... Endovascular Abdominal Aorta with N/A 10
Iliac Branch Procedures.
MS-DRGs 266-267............................ Endovascular Cardiac Valve 7 11
Replacement and Supplement
Procedures.
MS-DRGs 276-277............................ Cardiac Defibrillator Implant...... 6 12
MS-DRGs 268-269............................ Aortic and Heart Assist Procedures 8 13
Except Pulsation Balloon.
MS-DRGs 235-236............................ Coronary Bypass without Cardiac 4 14
Catheterization.
MS-DRG 245................................. AICD Generator Procedures.......... 14 15
MS-DRGs 270-272............................ Other Major Cardiovascular 11 16
Procedures.
MS-DRGs 228-229............................ Other Cardiothoracic Procedures.... 9 17
MS-DRGs 319-320............................ Other Endovascular Cardiac Valve 10 18
Procedures.
MS-DRGs 278-279............................ Ultrasound Accelerated and Other 20 19
Thrombolysis of Peripheral
Vascular Structures.
MS-DRGs 323-324............................ Coronary Intravascular Lithotripsy 17 20
with Intraluminal Device.
MS-DRGs 239-241............................ Amputation for Circulatory System 12 21
Disorders Except Upper Limb and
Toe.
MS-DRG 265................................. AICD Lead Procedures............... 15 22
MS-DRGs 273-274............................ Percutaneous and Other Intracardiac 16 23
Procedures.
MS-DRG 325................................. Coronary Intravascular Lithotripsy 17 24
without Intraluminal Device.
MS-DRG 263................................. Vein Ligation and Stripping........ 25 25
MS-DRGs 252-254............................ Other Vascular Procedures.......... 21 26
Proposed New MS-DRGs 359-360............... Percutaneous Coronary Atherectomy N/A 27
with Intraluminal Device.
MS-DRGs 242-244............................ Permanent Cardiac Pacemaker Implant 13 28
MS-DRGs 260-262............................ Cardiac Pacemaker Revision Except 24 29
Device Replacement.
Proposed New MS-DRG 318.................... Percutaneous Coronary Atherectomy N/A 30
without Intraluminal Device.
MS-DRGs 321-322............................ Percutaneous Cardiovascular 18 31
Procedures with Intraluminal
Device.
MS-DRGs 258-259............................ Cardiac Pacemaker Device 23 32
Replacement.
MS-DRGs 255-257............................ Upper Limb and Toe Amputation for 22 33
Circulatory System Disorders.
MS-DRGs 250-251............................ Percutaneous Cardiovascular 19 34
Procedures without Intraluminal
Device.
MS-DRG 264................................. Other Circulatory System O.R. 26 35
Procedures.
----------------------------------------------------------------------------------------------------------------
MDC 08 (Diseases and Disorders of the Musculoskeletal System and Connective Tissue)
----------------------------------------------------------------------------------------------------------------
MS-DRGs 426-428............................ Multiple Level Combined Anterior 1 1
and Posterior Spinal Fusion Except
Cervical.
MS-DRG 402................................. Single Level Combined Anterior and 2 5
Posterior Spinal Fusion Except
Cervical.
MS-DRGs 429-430............................ Combined Anterior and Posterior 3 2
Cervical Spinal Fusion.
MS-DRGs 456-458............................ Spinal Fusion Except Cervical with 4 3
Spinal Curvature, Malignancy,
Infection or Extensive Fusions.
MS-DRGs 447-448............................ Multiple Level Spinal Fusion Except 5 4
Cervical.
Proposed New MS-DRGs 403-404............... Hip or Knee Procedures with N/A 6
Principal Diagnosis of
Periprosthetic Joint Infection.
MS-DRGs 450-451............................ Single Level Spinal Fusion Except 6 7
Cervical.
MS-DRGs 461-462............................ Bilateral or Multiple Major Joint 7 10
Procedures of Lower Extremity.
MS-DRGs 463-465............................ Wound Debridement and Skin Graft 8 8
Except Hand for Musculoskeletal
and Connective Tissue Disorders.
MS-DRGs 466-468............................ Revision of Hip or Knee Replacement 9 9
MS-DRGs 521-522............................ Hip Replacement with Principal 10 18
Diagnosis of Hip Fracture.
MS-DRGs 469-470............................ Major Hip and Knee Joint 11 21
Replacement or Reattachment of
Lower Extremity or Total Ankle
Replacement.
MS-DRGs 471-473............................ Cervical Spinal Fusion............. 12 11
[[Page 18070]]
MS-DRGs 474-476............................ Amputation for Musculoskeletal 13 12
System and Connective Tissue
Disorders.
MS-DRGs 477-479............................ Biopsies of Musculoskeletal System 14 14
and Connective Tissue.
MS-DRGs 480-482............................ Hip and Femur Procedures Except 15 19
Major Joint.
MS-DRG 483................................. Major Joint or Limb Reattachment 16 13
Procedures of Upper Extremities.
MS-DRGs 485-487............................ Knee Procedures with Principal 17 17
Diagnosis of Infection.
MS-DRGs 488-489............................ Knee Procedures without Principal 17 27
Diagnosis of Infection.
MS-DRGs 518-520............................ Back and Neck Procedures Except 18 20
Spinal Fusion or Disc Device or
Neurostimulator.
MS-DRGs 492-494............................ Lower Extremity and Humerus 19 15
Procedures Except Hip, Foot and
Femur.
MS-DRGs 495-497............................ Local Excision and Removal of 20 25
Internal Fixation Devices Except
Hip and Femur.
MS-DRGs 498-499............................ Local Excision and Removal of 21 16
Internal Fixation Devices of Hip
and Femur.
MS-DRGs 500-502............................ Soft Tissue Procedures............. 22 24
MS-DRGs 503-505............................ Foot Procedures.................... 23 23
MS-DRG 506................................. Major Thumb or Joint Procedures.... 24 29
MS-DRGs 507-508............................ Major Shoulder or Elbow Joint 25 26
Procedures.
MS-DRGs 510-512............................ Shoulder, Elbow or Forearm 26 22
Procedures, Except Major Joint
Procedures.
MS-DRGs 513-514............................ Hand or Wrist Procedures, Except 27 28
Major Thumb or Joint Procedures.
MS-DRGs 515-517............................ Other Musculoskeletal System and 28 30
Connective Tissue O.R. Procedures.
----------------------------------------------------------------------------------------------------------------
For issues pertaining to the surgical hierarchy, as with other MS-
DRG related requests, we encourage interested parties to submit
comments no later than October 20, 2025, via MEARISTM at
https://mearis.cms.gov/public/home, so that they can be considered for
possible inclusion in the annual proposed rule.
11. Maintenance of the ICD-10-CM and ICD-10-PCS Coding Systems
In September 1985, the ICD-9-CM Coordination and Maintenance
Committee was formed. This is a Federal interdepartmental committee,
co-chaired by the Centers for Disease Control and Prevention's (CDC)
National Center for Health Statistics (NCHS) and CMS, charged with
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was made on October 1, 2013. Thereafter, the name of the
Committee was changed to the ICD-10 Coordination and Maintenance
Committee, effective with the March 19-20, 2014, meeting. The ICD-10
Coordination and Maintenance Committee addresses updates to the ICD-10-
CM and ICD-10-PCS coding systems. The Committee is jointly responsible
for approving coding changes, and developing errata, addenda, and other
modifications to the coding systems to reflect newly developed
procedures and technologies and newly identified diseases. The
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a
view toward standardizing coding applications and upgrading the quality
of the classification system.
The official list of ICD-9-CM diagnosis and procedure codes by
fiscal year can be found on the CMS website at: https://www.cms.gov/medicare/coding-billing/icd-10-codes/icd-9-cm-diagnosis-procedure-codes-abbreviated-and-full-code-titles.
The official list of ICD-10-CM and ICD-10-PCS codes can be found on
the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/index.html.
The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM
diagnosis codes included in the Tabular List and Alphabetic Index for
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index
for Procedures.
The Committee encourages participation in the previously mentioned
process by health-related organizations. In this regard, the Committee
holds public meetings for discussion of educational issues and proposed
coding changes. These meetings provide an opportunity for
representatives of recognized organizations in the coding field, such
as the American Health Information Management Association (AHIMA), the
American Hospital Association (AHA), and various physician specialty
groups, as well as individual physicians, health information management
professionals, and other members of the public, to contribute ideas on
coding matters. Members of the public may submit comments on the
proposed procedure code topics to CMS at:
[email protected] and may submit comments on the
proposed diagnosis code topics to the CDC/NCHS at: [email protected].
After considering the opinions expressed during the public meetings and
in writing, the Committee formulates recommendations, which then must
be approved by the agencies.
The Committee presented proposals for coding changes for
implementation in FY 2026 at a public meeting held on September 10-11,
2024, and finalized the coding changes after consideration of comments
received at the meetings and in writing by November 15, 2024.
In lieu of holding its Spring 2025 meeting, the Committee solicited
comments on the Spring 2025 ICD-10-PCS procedure code topics. The
deadline for submitting comments on these code proposals is April 18,
2025. Any new diagnosis and procedure codes for which there is
consensus of public support, and for which complete tabular and
indexing changes would be made by June 2025 would be included in the
October 1, 2025, update to the ICD-10-CM diagnosis and ICD-10-PCS
procedure code sets. As discussed in earlier sections of the preamble
of this FY 2026 IPPS/LTCH PPS proposed rule, there are new, revised,
and deleted ICD-10-CM diagnosis codes and ICD-10-PCS procedure codes
that are captured in 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, and Table
6F.--Revised Procedure Code
[[Page 18071]]
Titles for this FY 2026 IPPS/LTCH PPS proposed rule, which are
available on the CMS website at: https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps.
The code titles are adopted as part of the ICD-10 Coordination and
Maintenance Committee process. Therefore, although we make the code
titles available for the IPPS proposed rule, they are not subject to
comment in the proposed rule. Because of the length of these tables,
they are not published in the Addendum to the proposed rule. Rather,
they are available on the CMS website as discussed in section VI. of
the Addendum to the proposed rule.
Recordings for the virtual meeting discussions of the procedure
codes at the Committee's September 10-11, 2024, meeting and the
materials for the Spring 2025 ICD-10-PCS procedure code topics can be
obtained from the CMS website at: https://www.cms.gov/Medicare/Coding/ICD10/C-and-M-Meeting-Materials. The materials for the topics relating
to diagnosis codes discussed at the September 10-11, 2024, meeting can
be found at: https://www.cdc.gov/nchs/icd/icd-10-maintenance/meetings.html. These websites also provide detailed information about
the Committee, including information on requesting a new code,
participating in a Committee meeting, timeline requirements, submitting
comments, and meeting dates.
We encourage commenters to submit questions and comments on coding
issues involving diagnosis codes via email to: [email protected].
Questions and comments concerning the procedure codes should be
submitted via email to: [email protected].
CMS implemented 50 new procedure codes including cardiac
stereotactic body radiotherapy (SBRT), transplantation of the larynx,
repositioning of long bones using a ring external fixation device with
automated strut adjustment, supplementing the right atrium with
heterotopic bioprosthetic valve(s), the administration of emapalumab-
Izsg anti-IFNy monoclonal antibody, and the administration of
tarlatamab-dlle antineoplastic into the ICD-10-PCS classification
effective with discharges on and after April 1, 2025. The procedure
codes are as follows:
----------------------------------------------------------------------------------------------------------------
Procedure code Description O.R. MDC MS-DRG
----------------------------------------------------------------------------------------------------------------
D228DZZ **...................... Stereotactic other N................... 05 317
photon radiosurgery of
conduction mechanism.
0B118D6 *....................... Bypass trachea to N................... .............. ..............
esophagus with
intraluminal device,
via natural or
artificial opening
endoscopic.
0CYS0Z0......................... Transplantation of Y................... 03 143-145
larynx, allogeneic, 04 166-168
open approach. 21 907-909
24 957-959
0CYS0Z1......................... Transplantation of Y................... 03 143-145
larynx, syngeneic, open 04 166-168
approach. 21 907-909
24 957-959
0DX80Z7......................... Transfer small intestine Y................... 13 748
to vagina, open 21 907-909
approach. 24 957-959
0DX84Z7......................... Transfer small intestine Y................... 13 748
to vagina, percutaneous 21 907-909
endoscopic approach. 24 957-959
0TT00Z0......................... Resection of right Y................... 11 656-661
kidney, open approach, 21 907-909
allogeneic. 24 957-959
0TT00Z1......................... Resection of right Y................... 11 656-661
kidney, open approach, 21 907-909
syngeneic. 24 957-959
0TT00Z2......................... Resection of right Y................... 11 656-661
kidney, open approach, 21 907-909
zooplastic. 24 957-959
0TT10Z0......................... Resection of left Y................... 11 656-661
kidney, open approach, 21 907-909
allogeneic. 24 957-959
0TT10Z1......................... Resection of left Y................... 11 656-661
kidney, open approach, 21 907-909
syngeneic. 24 957-959
0TT10Z2......................... Resection of left Y................... 11 656-661
kidney, open approach, 21 907-909
zooplastic. 24 957-959
0U7C7DJ *....................... Dilation of cervix with N................... .............. ..............
intraluminal device,
temporary, via natural
or artificial opening.
10D10ZZ......................... Extraction of products Y................... 14 770
of conception, 796-798
retained, open approach.
3E0U0GC *....................... Introduction of other N................... .............. ..............
therapeutic substance
into joints, open
approach.
X2KA30A......................... Bypass left atrium using Y................... 05 270-272
conduit through 21 907-909
coronary sinus to right
atrium, percutaneous
approach, new
technology group 10.
X2U93YA......................... Supplement right atrium Y................... 05 266-267
with intraluminal
device, heterotopic
bioprosthetic valve(s),
percutaneous approach,
new technology group 10.
[[Page 18072]]
XNS40GA......................... Reposition right humeral Y................... 08 492-494
shaft with ring 21 907-909
external fixation 24 957-959
device with automated
strut adjustment, open
approach, new
technology group 10.
XNS43GA......................... Reposition right humeral Y................... 08 492-494
shaft with ring 21 907-909
external fixation 24 957-959
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
XNS50GA......................... Reposition left humeral Y................... 08 492-494
shaft with ring 21 907-909
external fixation 24 957-959
device with automated
strut adjustment, open
approach, new
technology group 10.
XNS53GA......................... Reposition left humeral Y................... 08 492-494
shaft with ring 21 907-909
external fixation 24 957-959
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
XNS60GA......................... Reposition right radius Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment, open
approach, new
technology group 10.
XNS63GA......................... Reposition right radius Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment,
percutaneous approach,
new technology group 10.
XNS70GA......................... Reposition left radius Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment, open
approach, new
technology group 10.
XNS73GA......................... Reposition left radius Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment,
percutaneous approach,
new technology group 10.
XNS80GA......................... Reposition right ulna Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment, open
approach, new
technology group 10.
XNS83GA......................... Reposition right ulna Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment,
percutaneous approach,
new technology group 10.
XNS90GA......................... Reposition left ulna Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment, open
approach, new
technology group 10.
XNS93GA......................... Reposition left ulna Y................... 08 510-512
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment,
percutaneous approach,
new technology group 10.
XNSA0GA......................... Reposition right upper Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment, open
approach, new
technology group 10.
XNSA3GA......................... Reposition right upper Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
XNSB0GA......................... Reposition left upper Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment, open
approach, new
technology group 10.
XNSB3GA......................... Reposition left upper Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
XNSC0GA......................... Reposition right lower Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment, open
approach, new
technology group 10.
XNSC3GA......................... Reposition right lower Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
XNSD0GA......................... Reposition left lower Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment, open
approach, new
technology group 10.
XNSD3GA......................... Reposition left lower Y................... 08 480-482
femur with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
XNSE0GA......................... Reposition right femoral Y................... 08 480-482
shaft with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment, open
approach, new
technology group 10.
XNSE3GA......................... Reposition right femoral Y................... 08 480-482
shaft with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
XNSF0GA......................... Reposition left femoral Y................... 08 480-482
shaft with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment, open
approach, new
technology group 10.
XNSF3GA......................... Reposition left femoral Y................... 08 480-482
shaft with ring 21 907-909
external fixation 24 956
device with automated
strut adjustment,
percutaneous approach,
new technology group 10.
[[Page 18073]]
XNSG0GA......................... Reposition right tibia Y................... 08 492-494
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment, open
approach, new
technology group 10.
XNSG3GA......................... Reposition right tibia Y................... 08 492-494
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment,
percutaneous approach,
new technology group 10.
XNSH0GA......................... Reposition left tibia Y................... 08 492-494
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment, open
approach, new
technology group 10.
XNSH3GA......................... Reposition left tibia Y................... 08 492-494
with ring external 21 907-909
fixation device with 24 957-959
automated strut
adjustment,
percutaneous approach,
new technology group 10.
XW033MA *....................... Introduction of N................... .............. ..............
emapalumab-lzsg anti-
IFNy monoclonal
antibody into
peripheral vein,
percutaneous approach,
new technology group 10.
XW033NA *....................... Introduction of N................... .............. ..............
tarlatamab-dlle
antineoplastic into
peripheral vein,
percutaneous approach,
new technology group 10.
XW043MA *....................... Introduction of N................... .............. ..............
emapalumab-lzsg anti-
IFNy monoclonal
antibody into central
vein, percutaneous
approach, new
technology group 10.
XW043NA *....................... Introduction of N................... .............. ..............
tarlatamab-dlle
antineoplastic into
central vein,
percutaneous approach,
new technology group 10.
XXE5X5A *....................... Measurement of immune N................... .............. ..............
response, whole blood
cellular assessment via
microfluidic
deformability, new
technology group 10.
----------------------------------------------------------------------------------------------------------------
* As the procedure codes are designated as non-O.R. procedures, there is no assigned MDC or MS-DRG. The ICD-10
MS-DRG assignment is dependent on the reported principal diagnosis, any secondary diagnoses defined as a
complication or comorbidity (CC) or major complication or comorbidity (MCC), procedures or services performed,
age, sex, and discharge status.
** Non-O.R. procedure affecting the MS-DRG assignment.
The 50 procedure codes are also reflected in Table 6B.--New
Procedure Codes, which is available on the CMS website at: https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS. As with the other new procedure codes and MS-DRG
assignments included in Table 6B in association with this FY 2026 IPPS/
LTCH PPS proposed rule, we are soliciting public comments on the most
appropriate MDC, MS-DRG, and operating room status assignments for
these codes for FY 2026, as well as any other options for the GROUPER
logic.
We note that Change Request (CR) 13917, Transmittal 12995, titled
``April 2025 Update to the Medicare Severity-Diagnosis Related Group
(MS-DRG) Grouper and Medicare Code Editor (MCE) Version 42.1'' was
issued on December 12, 2024 (available on the CMS website at: https://www.cms.gov/medicare/regulations-guidance/transmittals/2024-transmittals/r12995cp) regarding the release of an updated version of
the ICD-10 MS-DRG GROUPER and Medicare Code Editor software, Version
42.1, effective with discharges on and after April 1, 2025, reflecting
the new procedure codes. The updated software, along with the updated
ICD-10 MS-DRG Version 42.1 Definitions Manual and the Definitions of
Medicare Code Edits Version 42.1 manual is available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
In the September 7, 2001, final rule implementing the IPPS new
technology add-on payments (66 FR 46906), we indicated we would attempt
to include proposals for procedure codes that would describe new
technology discussed and approved at the Spring meeting as part of the
code revisions effective the following October.
Section 503(a) of the Medicare Modernization Act (Pub. L. 108-173)
included a requirement for updating diagnosis and procedure codes twice
a year instead of a single update on October 1 of each year. This
requirement was included as part of the amendments to the Act relating
to recognition of new technology under the IPPS. Section 503(a) of
Public Law 108-173 amended section 1886(d)(5)(K) of the Act by adding a
clause (vii) which states that the Secretary shall provide for the
addition of new diagnosis and procedure codes on April 1 of each year,
but the addition of such codes shall not require the Secretary to
adjust the payment (or diagnosis-related group classification) until
the fiscal year that begins after such date. This requirement improves
the recognition of new technologies under the IPPS by providing
information on these new technologies at an earlier date. Data will be
available 6 months earlier than would be possible with updates
occurring only once a year on October 1.
In the FY 2005 IPPS final rule, we implemented section
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law
108-173, by developing a mechanism for approving, in time for the April
update, diagnosis and procedure code revisions needed to describe new
technologies and medical services for purposes of the new technology
add-on payment process. We also established the following process for
making these determinations. Topics considered during the Fall ICD-10
(previously ICD-9-CM) Coordination and Maintenance Committee meeting
were considered for an April 1 update if a strong and convincing case
was made by the requestor during the Committee's public meeting. The
request needed to identify the reason why a new code was needed in
April for purposes of the new technology process. Meeting participants
and those reviewing the Committee meeting materials were provided the
opportunity to comment on the expedited request. We refer the reader to
the FY 2022 IPPS/LTCH PPS final rule (86 FR 44950) for further
discussion of the implementation of this prior April 1 update for
purposes of the new technology add-on payment process.
However, as discussed in the FY 2022 IPPS/LTCH PPS final rule (86
FR 44950 through 44956), we adopted an April 1 implementation date, in
addition to the
[[Page 18074]]
annual October 1 update, beginning with April 1, 2022. We noted that
the intent of this April 1 implementation date is to allow flexibility
in the ICD-10 code update process. With this new April 1 update, CMS
now uses the same process for consideration of all requests for an
April 1 implementation date, including for purposes of the new
technology add-on payment process (that is, the prior process for
consideration of an April 1 implementation date only if a strong and
convincing case was made by the requestor during the meeting no longer
applies). We are continuing to use several aspects of our existing
established process to implement new codes through the April 1 code
update, which includes presenting proposals for April 1 consideration
at the September ICD-10 Coordination and Maintenance Committee meeting,
requesting public comments, reviewing the public comments, finalizing
codes, and announcing the new codes with their assignments consistent
with the new GROUPER release information. We note that under our
established process, requestors indicate whether they are submitting
their code request for consideration for an April 1 implementation date
or an October 1 implementation date. The ICD-10 Coordination and
Maintenance Committee makes efforts to accommodate the requested
implementation date for each request submitted. However, the Committee
determines which requests are to be presented for consideration for an
April 1 implementation date or an October 1 implementation date. As
discussed earlier in this section of the preamble of this FY 2026 IPPS/
LTCH PPS proposed rule, there were code proposals presented for an
April 1, 2025, implementation at the September 10-11, 2024, Committee
meetings. Following the receipt of public comments, the code proposals
were approved and finalized, therefore, there were new codes
implemented April 1, 2025.
Consistent with the process we outlined for the April 1
implementation date, we announced the new codes in November 2024 and
provided the updated code files in December 2024. The NCHS provided the
ICD-10-CM Official Guidelines for Coding and Reporting in January 2025.
By February 27, 2025, we made available the updated Version 42.1 ICD-10
MS-DRG GROUPER software and related materials on the CMS web page at:
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/MS-DRG-Classifications-and-Software.
ICD-9-CM addendum and code title information are published on the
CMS website at https://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/addendum. ICD-10-CM and ICD-10-PCS addendum
and code title information are published on the CMS website at https://www.cms.gov/Medicare/Coding/ICD10. CMS also sends electronic files
containing all ICD-10-CM and ICD-10-PCS coding changes to its Medicare
contractors for use in updating their systems and providing education
to providers. Information on ICD-10-CM diagnosis codes, along with the
Official ICD-10-CM Coding Guidelines, can be found on the CDC website
at https://www.cdc.gov/nchs/icd/icd-10-cm/files.html. Additionally,
information on new, revised, and deleted ICD-10-CM diagnosis and ICD-
10-PCS procedure codes is provided to the AHA for publication in the
Coding Clinic for ICD-10. The AHA also distributes coding update
information to publishers and software vendors.
For FY 2025, there are currently 74,044 diagnosis codes and 78,986
procedure codes. As displayed in Table 6A.--New Diagnosis Codes and in
Table 6B.--New Procedure Codes associated with this FY 2026 IPPS/LTCH
PPS proposed rule (and available on the CMS website at https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS), there are 487 new diagnosis codes and 14 new
procedure codes that have been finalized for FY 2026 at the time of the
development of this FY 2026 IPPS/LTCH PPS proposed rule and 50 new
procedure codes that were effective with discharges on and after April
1, 2025. The code titles are adopted as part of the ICD-10 Coordination
and Maintenance Committee process. Thus, although we publish the code
titles in the IPPS proposed and final rules, they are not subject to
comment in the proposed or final rules.
12. Replaced Devices Offered Without Cost or With a Credit
a. Background
In the FY 2008 IPPS final rule with comment period (72 FR 47246
through 47251), we discussed the topic of Medicare payment for devices
that are replaced without cost or where credit for a replaced device is
furnished to the hospital. We implemented a policy to reduce a
hospital's IPPS payment for certain MS-DRGs where the implantation of a
device that subsequently failed or was recalled determined the base MS-
DRG assignment. At that time, we specified that we would reduce a
hospital's IPPS payment for those MS-DRGs where the hospital received a
credit for a replaced device equal to 50 percent or more of the cost of
the device.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 through
51557), we clarified this policy to state that the policy applies if
the hospital received a credit equal to 50 percent or more of the cost
of the replacement device and issued instructions to hospitals
accordingly.
b. Proposed Changes for FY 2026
As discussed in section II.C.3. of the preamble of this FY 2026
IPPS/LTCH PPS proposed rule, for FY 2026, under MDC 01, we are
proposing to add procedure code combinations that describe the
insertion of multiple or single array generators and the insertion of
neurostimulator lead into the brain or cerebral ventricle and the
procedure code combinations that describe the insertion of a
neurostimulator generator into the skull and the insertion of a
neurostimulator lead into the brain to a new ``intracranial
neurostimulator implant'' logic list in MS-DRGs 020, 021, and 022. A
subset of the procedures currently assigned to MS-DRGs 023 and 024 are
being proposed for reassignment to MS-DRGs 020, 021, and 022. We are
also proposing to revise the title of MS-DRG 020 from ``Intracranial
Vascular Procedures with Principal Diagnosis Hemorrhage with MCC'' to
``Intracranial Vascular Procedures with Principal Diagnosis Hemorrhage
or Intracranial Neurostimulator Implant with MCC''; revise the title of
MS-DRG 021 from ``Intracranial Vascular Procedures with Principal
Diagnosis Hemorrhage with CC'' to ``Intracranial Vascular Procedures
with Principal Diagnosis Hemorrhage or Intracranial Neurostimulator
Implant with CC''; revise the title of MS-DRG 022 from ``Intracranial
Vascular Procedures with Principal Diagnosis Hemorrhage without CC/
MCC'' to ``Intracranial Vascular Procedures with Principal Diagnosis
Hemorrhage or Intracranial Neurostimulator Implant without CC/MCC'';
revise the title of MS-DRG 023 from ``Craniotomy with Major Device
Implant or Acute Complex CNS Principal Diagnosis with MCC or
Chemotherapy Implant or Epilepsy with Neurostimulator'' to ``Craniotomy
with Acute Complex CNS Principal Diagnosis with MCC or Antineoplastic
Implant''; and revise the title of MS-DRG 024 from ``Craniotomy with
Major Device Implant or Acute Complex CNS Principal
[[Page 18075]]
Diagnosis without MCC'' to ``Craniotomy with Acute Complex CNS
Principal Diagnosis without MCC''.
Additionally, as discussed in section II.C.4. of the preamble of
this FY 2026 IPPS/LTCH PPS proposed rule, for FY 2026, under MDC 05, we
are proposing new MS-DRG 209 (Complex Aortic Arch Procedures) and new
MS-DRG 213 (Endovascular Abdominal Aorta with Iliac Branch Procedures).
A subset of the procedures currently assigned to MS-DRGs 216, 217, 218,
219, 220 and 221 are being proposed for assignment to proposed new MS-
DRG 209 and a subset of the procedures currently assigned to MS-DRGs
268, 269, 270, 271, and 272 are being proposed for assignment to
proposed new MS-DRG 213.
As stated in the FY 2016 IPPS/LTCH PPS proposed rule (80 FR 24409),
we generally map new MS-DRGs onto the list when they are formed from
procedures previously assigned to MS-DRGs that are already on the list.
Currently, MS-DRGs 023, 024, 216, 217, 218, 219, 220, 221, 268, 269,
270, 271, and 272 are on the list of MS-DRGs subject to the policy for
payment under the IPPS for replaced devices offered without cost or
with a credit as shown in the following table. Therefore, we are
proposing that if the applicable proposed MS-DRG changes are finalized,
we also would add MS-DRGs 020, 021, and 022 and proposed new MS-DRGs
209 and 213 to the list of MS-DRGs subject to the policy for payment
under the IPPS for replaced devices offered without cost or with a
credit and make conforming changes to the titles of MS-DRGs 023 and 024
in the list of MS-DRGs subject to the policy as reflected in the
following table. We are also proposing to continue to include the
existing MS-DRGs currently subject to the policy as displayed in the
following table.
----------------------------------------------------------------------------------------------------------------
MDC MS-DRG MS-DRG title
----------------------------------------------------------------------------------------------------------------
Pre-MDC....................................... 001 Heart Transplant or Implant of Heart Assist
System with MCC.
Pre-MDC....................................... 002 Heart Transplant or Implant of Heart Assist
System without MCC.
01............................................ 020 Intracranial Vascular Procedures with Principal
Diagnosis Hemorrhage or Intracranial
Neurostimulator Implant with MCC.
01............................................ 021 Intracranial Vascular Procedures with Principal
Diagnosis Hemorrhage or Intracranial
Neurostimulator Implant with CC.
01............................................ 022 Intracranial Vascular Procedures with Principal
Diagnosis Hemorrhage or Intracranial
Neurostimulator Implant without CC/MCC.
01............................................ 023 Craniotomy with Acute Complex CNS Principal
Diagnosis with MCC or Antineoplastic Implant.
01............................................ 024 Craniotomy with Acute Complex CNS Principal
Diagnosis without MCC.
01............................................ 025 Craniotomy and Endovascular Intracranial
Procedures with MCC.
01............................................ 026 Craniotomy and Endovascular Intracranial
Procedures with CC.
01............................................ 027 Craniotomy and Endovascular Intracranial
Procedures without CC/MCC.
01............................................ 040 Peripheral, Cranial Nerve and Other Nervous
System Procedures with MCC.
01............................................ 041 Peripheral, Cranial Nerve and Other Nervous
System Procedures with CC or Peripheral
Neurostimulator.
01............................................ 042 Peripheral, Cranial Nerve and Other Nervous
System Procedures without CC/MCC.
03............................................ 140 Major Head and Neck Procedures with MCC.
03............................................ 141 Major Head and Neck Procedures with CC.
03............................................ 142 Major Head and Neck Procedures without CC/MCC.
05............................................ 209 Complex Aortic Arch Procedures.
05............................................ 213 Endovascular Abdominal Aorta with Iliac Branch
Procedures.
05............................................ 215 Other Heart Assist System Implant.
05............................................ 216 Cardiac Valve and Other Major Cardiothoracic
Procedure with Cardiac Catheterization with
MCC.
05............................................ 217 Cardiac Valve and Other Major Cardiothoracic
Procedure with Cardiac Catheterization with CC.
05............................................ 218 Cardiac Valve and Other Major Cardiothoracic
Procedure with Cardiac Catheterization without
CC/MCC.
05............................................ 219 Cardiac Valve and Other Major Cardiothoracic
Procedure without Cardiac Catheterization with
MCC.
05............................................ 220 Cardiac Valve and Other Major Cardiothoracic
Procedure without Cardiac Catheterization with
CC.
05............................................ 221 Cardiac Valve and Other Major Cardiothoracic
Procedure without Cardiac Catheterization
without CC/MCC.
05............................................ 242 Permanent Cardiac Pacemaker Implant with MCC.
05............................................ 243 Permanent Cardiac Pacemaker Implant with CC.
05............................................ 244 Permanent Cardiac Pacemaker Implant without CC/
MCC.
05............................................ 245 AICD Generator Procedures.
05............................................ 258 Cardiac Pacemaker Device Replacement with MCC.
05............................................ 259 Cardiac Pacemaker Device Replacement without
MCC.
05............................................ 260 Cardiac Pacemaker Revision Except Device
Replacement with MCC.
05............................................ 261 Cardiac Pacemaker Revision Except Device
Replacement with CC.
05............................................ 262 Cardiac Pacemaker Revision Except Device
Replacement without CC/MCC.
05............................................ 265 AICD Lead Procedures.
05............................................ 266 Endovascular Cardiac Valve Replacement and
Supplement Procedures with MCC.
05............................................ 267 Endovascular Cardiac Valve Replacement and
Supplement Procedures without MCC.
05............................................ 268 Aortic and Heart Assist Procedures Except
Pulsation Balloon with MCC.
05............................................ 269 Aortic and Heart Assist Procedures Except
Pulsation Balloon without MCC.
05............................................ 270 Other Major Cardiovascular Procedures with MCC.
05............................................ 271 Other Major Cardiovascular Procedures with CC.
05............................................ 272 Other Major Cardiovascular Procedures without CC/
MCC.
05............................................ 275 Cardiac Defibrillator Implant with Cardiac
Catheterization and MCC.
05............................................ 276 Cardiac Defibrillator Implant with MCC or
Carotid Sinus Neurostimulator.
[[Page 18076]]
05............................................ 277 Cardiac Defibrillator Implant without MCC.
05............................................ 319 Other Endovascular Cardiac Valve Procedures with
MCC.
05............................................ 320 Other Endovascular Cardiac Valve Procedures
without MCC.
08............................................ 461 Bilateral or Multiple Major Joint Procedures of
Lower Extremity with MCC.
08............................................ 462 Bilateral or Multiple Major Joint Procedures of
Lower Extremity without MCC.
08............................................ 466 Revision of Hip or Knee Replacement with MCC.
08............................................ 467 Revision of Hip or Knee Replacement with CC.
08............................................ 468 Revision of Hip or Knee Replacement without CC/
MCC.
08............................................ 469 Major Hip and Knee Joint Replacement or
Reattachment of Lower Extremity with MCC or
Total Ankle Replacement.
08............................................ 470 Major Hip and Knee Joint Replacement or
Reattachment of Lower Extremity without MCC.
08............................................ 521 Hip Replacement with Principal Diagnosis of Hip
Fracture with MCC.
08............................................ 522 Hip Replacement with Principal Diagnosis of Hip
Fracture without MCC.
----------------------------------------------------------------------------------------------------------------
The final list of MS-DRGs subject to the IPPS policy for replaced
devices offered without cost or with a credit will be included in the
FY 2026 IPPS/LTCH PPS final rule and also will be issued to providers
in the form of a Change Request (CR).
D. Recalibration of the FY 2026 MS-DRG Relative Weights
1. Data Sources for Developing the Relative Weights
Consistent with our established policy, in developing the MS-DRG
relative weights for FY 2026, we are proposing to use two data sources:
claims data and cost report data. The claims data source is the MedPAR
file, which includes fully coded diagnostic and procedure data for all
Medicare inpatient hospital bills. The FY 2024 MedPAR data used in this
proposed rule include discharges occurring on October 1, 2023, through
September 30, 2024, based on bills received by CMS through December 31,
2024, from all hospitals subject to the IPPS and short-term, acute care
hospitals in Maryland (which at that time were under a waiver from the
IPPS).
The FY 2024 MedPAR file used in calculating the relative weights
includes data for approximately 6,860,436 Medicare discharges from IPPS
providers. Discharges for Medicare beneficiaries enrolled in a Medicare
Advantage managed care plan are excluded from this analysis. These
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on
the claim record is equal to ``1'' or when the MedPAR DRG payment
field, which represents the total payment for the claim, is equal to
the MedPAR ``Indirect Medical Education (IME)'' payment field,
indicating that the claim was an ``IME only'' claim submitted by a
teaching hospital on behalf of a beneficiary enrolled in a Medicare
Advantage managed care plan. In addition, the December 2024 update of
the FY 2024 MedPAR file complies with version 5010 of the X12 HIPAA
Transaction and Code Set Standards, and includes a variable called
``claim type.'' Claim type ``60'' indicates that the claim was an
inpatient claim paid as fee-for-service. Claim types ``61'', ``62'',
``63'', and ``64'' relate to encounter claims, Medicare Advantage IME
claims, and HMO no-pay claims. Therefore, the calculation of the
relative weights for FY 2026 also excludes claims with claim type
values not equal to ``60.'' The data exclude CAHs, including hospitals
that subsequently became CAHs after the period from which the data were
taken. In addition, the data exclude Rural Emergency Hospitals (REHs),
including hospitals that subsequently became REHs after the period from
which the data were taken. We note that the proposed FY 2026 relative
weights are based on the ICD-10-CM diagnosis codes and ICD-10-PCS
procedure codes from the FY 2024 MedPAR claims data, grouped through
the ICD-10 version of the proposed FY 2026 GROUPER (Version 43).
The second data source used in the cost-based relative weighting
methodology is the Medicare cost report data files from the Healthcare
Cost Report Information System (HCRIS). In general, we use the HCRIS
dataset that is 3 years prior to the IPPS fiscal year. Specifically,
for this proposed rule, we used the December 2024 update of the FY 2023
HCRIS for calculating the FY 2026 cost-based relative weights.
Consistent with our historical practice, for this FY 2026 proposed
rule, we are providing the version of the HCRIS from which we
calculated these 19 cost-to charge-ratios (CCRs) on the CMS website at
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS. Click on the link on the left side of the screen
titled ``FY 2026 IPPS Proposed Rule Home Page'' or ``Acute Inpatient
Files for Download.''
2. Methodology for Calculation of the Relative Weights
a. General
We calculated the proposed FY 2026 relative weights based on 19
CCRs. The methodology we are proposing to use to calculate the FY 2026
MS-DRG cost-based relative weights based on claims data in the FY 2024
MedPAR file and data from the FY 2023 Medicare cost reports is as
follows:
To the extent possible, all the claims were regrouped
using the proposed FY 2026 MS-DRG classifications discussed in sections
II.B. and II.C. of the preamble of this proposed rule.
The transplant cases that were used to establish the
relative weights for heart and heart-lung, liver and/or intestinal, and
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively)
were limited to those Medicare-approved transplant centers that have
cases in the FY 2024 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those
facilities that have received approval from CMS as transplant centers.)
Organ acquisition costs for kidney, heart, heart-lung,
liver, lung, pancreas, and intestinal (or multivisceral organs)
transplants continue to be paid on a reasonable cost basis.
Because these acquisition costs are paid separately from the
prospective payment rate, it is necessary to subtract the acquisition
charges from the total charges on each transplant bill that showed
acquisition charges before computing the average cost for each MS-DRG
and before eliminating statistical outliers.
Section 108 of the Further Consolidated Appropriations Act, 2020
provides that, for cost reporting periods beginning on or after October
1, 2020, costs related to hematopoietic stem cell acquisition for the
purpose of an allogeneic hematopoietic stem cell transplant shall be
paid on a reasonable
[[Page 18077]]
cost basis. We refer the reader to the FY 2021 IPPS/LTCH PPS final rule
for further discussion of the reasonable cost basis payment for cost
reporting periods beginning on or after October 1, 2020 (85 FR 58835
through 58842). For FY 2022 and subsequent years, we subtract the
hematopoietic stem cell acquisition charges from the total charges on
each transplant bill that showed hematopoietic stem cell acquisition
charges before computing the average cost for each MS-DRG and before
eliminating statistical outliers.
Claims with total charges or total lengths of stay less
than or equal to zero were deleted. Claims that had an amount in the
total charge field that differed by more than $30.00 from the sum of
the routine day charges, intensive care charges, pharmacy charges,
implantable devices charges, supplies and equipment charges, therapy
services charges, operating room charges, cardiology charges,
laboratory charges, radiology charges, other service charges, labor and
delivery charges, inhalation therapy charges, emergency room charges,
blood and blood products charges, anesthesia charges, cardiac
catheterization charges, CT scan charges, and MRI charges were also
deleted.
At least 92.6 percent of the providers in the MedPAR file
had charges for 14 of the 19 cost centers. All claims of providers that
did not have charges greater than zero for at least 14 of the 19 cost
centers were deleted. In other words, a provider must have no more than
five blank cost centers. If a provider did not have charges greater
than zero in more than five cost centers, the claims for the provider
were deleted.
Statistical outliers were eliminated by removing all cases
that were beyond 3.0 standard deviations from the geometric mean of the
log distribution of both the total charges per case and the total
charges per day for each MS-DRG.
Effective October 1, 2008, because hospital inpatient
claims include a Present on Admission (POA) field for each diagnosis
present on the claim, only for purposes of relative weight-setting, the
POA indicator field was reset to ``Y'' for ``Yes'' for all claims that
otherwise have an ``N'' (No) or a ``U'' (documentation insufficient to
determine if the condition was present at the time of inpatient
admission) in the POA field.
Under current payment policy, the presence of specific HAC codes,
as indicated by the POA field values, can generate a lower payment for
the claim. Specifically, if the particular condition is present on
admission (that is, a ``Y'' indicator is associated with the diagnosis
on the claim), it is not a HAC, and the hospital is paid for the higher
severity (and, therefore, the higher weighted MS-DRG). If the
particular condition is not present on admission (that is, an ``N''
indicator is associated with the diagnosis on the claim) and there are
no other complicating conditions, the DRG GROUPER assigns the claim to
a lower severity (and, therefore, the lower weighted MS-DRG) as a
penalty for allowing a Medicare inpatient to contract a HAC. While the
POA reporting meets policy goals of encouraging quality care and
generates program savings, it presents an issue for the relative
weight-setting process. Because cases identified as HACs are likely to
be more complex than similar cases that are not identified as HACs, the
charges associated with HAC cases are likely to be higher as well.
Therefore, if the higher charges of these HAC claims are grouped into
lower severity MS-DRGs prior to the relative weight-setting process,
the relative weights of these particular MS-DRGs would become
artificially inflated, potentially skewing the relative weights. In
addition, we want to protect the integrity of the budget neutrality
process by ensuring that, in estimating payments, no increase to the
standardized amount occurs as a result of lower overall payments in a
previous year that stem from using weights and case-mix that are based
on lower severity MS-DRG assignments. If this would occur, the
anticipated cost savings from the HAC policy would be lost.
To avoid these problems, we reset the POA indicator field to ``Y''
only for relative weight-setting purposes for all claims that otherwise
have an ``N'' or a ``U'' in the POA field. This resetting ``forced''
the more costly HAC claims into the higher severity MS-DRGs as
appropriate, and the relative weights calculated for each MS-DRG more
closely reflect the true costs of those cases.
In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013
and subsequent fiscal years, we finalized a policy to treat hospitals
that participate in the Bundled Payments for Care Improvement (BPCI)
initiative the same as prior fiscal years for the IPPS payment modeling
and ratesetting process without regard to hospitals' participation
within these bundled payment models (77 FR 53341 through 53343).
Specifically, because acute care hospitals participating in the BPCI
Initiative still receive IPPS payments under section 1886(d) of the
Act, we include all applicable data from these subsection (d) hospitals
in our IPPS payment modeling and ratesetting calculations as if the
hospitals were not participating in those models under the BPCI
initiative. We refer readers to the FY 2013 IPPS/LTCH PPS final rule
for a complete discussion on our final policy for the treatment of
hospitals participating in the BPCI initiative in our ratesetting
process. For additional information on the BPCI initiative, we refer
readers to the CMS' Center for Medicare and Medicaid Innovation's
website at https://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
The participation of hospitals in the BPCI initiative concluded on
September 30, 2018. The participation of hospitals in the BPCI Advanced
model started on October 1, 2018. The BPCI Advanced model, tested under
the authority of section 1115A of the Act, is comprised of a single
payment and risk track, which bundles payments for multiple services
that beneficiaries receive during a Clinical Episode. Acute care
hospitals may participate in BPCI Advanced in one of two capacities: as
a model Participant or as a downstream Episode Initiator. Regardless of
the capacity in which they participate in the BPCI Advanced model,
participating acute care hospitals will continue to receive IPPS
payments under section 1886(d) of the Act. Acute care hospitals that
are Participants also assume financial and quality performance
accountability for Clinical Episodes in the form of a reconciliation
payment. For additional information on the BPCI Advanced model, we
refer readers to the BPCI Advanced web page on the CMS Center for
Medicare and Medicaid Innovation's website at https://innovation.cms.gov/initiatives/bpci-advanced. Consistent with our
policy for FY 2024, and consistent with how we have treated hospitals
that participated in the BPCI Initiative, for FY 2025, we continue to
believe it is appropriate to include all applicable data from the
subsection (d) hospitals participating in the BPCI Advanced model in
our IPPS payment modeling and ratesetting calculations because, as
noted previously, these hospitals are still receiving IPPS payments
under section 1886(d) of the Act. Consistent with the FY 2025 IPPS/LTCH
PPS final rule, we are also proposing to include all applicable data
from subsection (d) hospitals participating in the Comprehensive Care
for Joint Replacement (CJR) Model in our IPPS
[[Page 18078]]
payment modeling and ratesetting calculations.
The charges for each of the 19 cost groups for each claim were
standardized to remove the effects of differences in area wage levels,
IME and DSH payments, and for hospitals located in Alaska and Hawaii,
the applicable cost-of-living adjustment. Because hospital charges
include charges for both operating and capital costs, we standardized
total charges to remove the effects of differences in geographic
adjustment factors, cost-of-living adjustments, and DSH payments under
the capital IPPS as well. Charges were then summed by MS-DRG for each
of the 19 cost groups so that each MS-DRG had 19 standardized charge
totals. Statistical outliers were then removed. These charges were then
adjusted to cost by applying the proposed national average CCRs
developed from the FY 2023 cost report data.
The 19 cost centers that we used in the relative weight calculation
are shown in a supplemental data file, Cost Center HCRIS Lines
Supplemental Data File, posted via the internet on the CMS website for
this final rule and available at https://www.cms.gov/Medicare/Medicare-
Fee-for-Service-Payment/AcuteInpatientPPS. The supplemental data file
shows the lines on the cost report and the corresponding revenue codes
that we used to create the 19 proposed national cost center CCRs. If we
receive comments about the groupings in this supplemental data file, we
may consider these comments as we finalize our policy.
Consistent with historical practice, we account for rare situations
of non-monotonicity in a base MS-DRG and its severity levels, where the
mean cost in the higher severity level is less than the mean cost in
the lower severity level, in determining the relative weights for the
different severity levels. If there are initially non-monotonic
relative weights in the same base DRG and its severity levels, then we
combine the cases that group to the specific non-monotonic MS-DRGs for
purposes of relative weight calculations. For example, if there are two
non-monotonic MS-DRGs, combining the cases across those two MS-DRGs
results in the same relative weight for both MS-DRGs. The relative
weight calculated using the combined cases for those severity levels is
monotonic, effectively removing any non-monotonicity with the base DRG
and its severity levels. For this FY 2026 proposed rule, this
calculation was applied to address non-monotonicity for cases that
grouped to the following: MS-DRG 016 and MS-DRG 017, MS-DRG 095 and MS-
DRG 096, MS-DRG 504 and MS-DRG 505, MS-DRG 797 and MS-DRG 798. In the
supplemental file titled AOR/BOR File, we include statistics for the
affected MS-DRGs both separately and with cases combined.
We are inviting public comments on our proposals related to
recalibration of the proposed FY 2026 relative weights and the changes
in relative weights from FY 2025.
b. Relative Weight Calculation for MS-DRG 018
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58451 through
58453), we created MS-DRG 018 for cases that include procedures
describing CAR T-cell therapies. We also finalized our proposal to
modify our existing relative weight methodology to ensure that the
relative weight for MS-DRG 018 appropriately reflects the relative
resources required for providing CAR T-cell therapy outside of a
clinical trial, while still accounting for the clinical trial cases in
the overall average cost for all MS-DRGs (85 FR 58599 through 58600).
Specifically, we stated that clinical trial claims that group to new
MS-DRG 018 would not be included when calculating the average cost for
MS-DRG 018 that is used to calculate the relative weight for this MS-
DRG, so that the relative weight reflects the costs of the CAR T-cell
therapy drug. We stated that we identified clinical trial claims as
claims that contain ICD-10-CM diagnosis code Z00.6 or contain
standardized drug charges of less than $373,000, which was the average
sales price of KYMRIAH and YESCARTA, the two CAR T-cell biological
products licensed to treat relapsed/refractory large B-cell lymphoma as
of the time of the development of the FY 2021 final rule. In addition,
we stated that (a) when the CAR T-cell therapy product is purchased in
the usual manner, but the case involves a clinical trial of a different
product, the claim will be included when calculating the average cost
for new MS-DRG 018 to the extent such cases can be identified in the
historical data, and (b) when there is expanded access use of
immunotherapy, these cases will not be included when calculating the
average cost for new MS-DRG 018 to the extent such cases can be
identified in the historical data.
We also finalized our proposal to calculate an adjustment to
account for the CAR T-cell therapy cases identified as clinical trial
cases in calculating the national average standardized cost per case
that is used to calculate the relative weights for all MS-DRGs and for
purposes of budget neutrality and outlier simulations. We calculate
this adjustor by dividing the average cost for cases that we identify
as clinical trial cases by the average cost for cases that we identify
as non-clinical trial cases, with the additional refinements that (a)
when the CAR T-cell therapy product is purchased in the usual manner,
but the case involves a clinical trial of a different product, the
claim will be included when calculating the average cost for cases not
determined to be clinical trial cases to the extent such cases can be
identified in the historical data, and (b) when there is expanded
access use of immunotherapy, these cases will be included when
calculating the average cost for cases determined to be clinical trial
cases to the extent such cases can be identified in the historical
data. We stated that to the best of our knowledge, there were no claims
in the historical data used in the calculation of this adjustment for
cases involving a clinical trial of a different product, and to the
extent the historical data contain claims for cases involving expanded
access use of immunotherapy we believe those claims would have drug
charges less than $373,000.
In the FY 2021 IPPS/LTCH PPS final rule (85 FR 58842), we also
finalized an adjustment to the payment amount for applicable clinical
trial and expanded access use immunotherapy cases that group to MS-DRG
018, and indicated that we would provide instructions for identifying
these claims in separate guidance. Following the issuance of the FY
2021 IPPS/LTCH PPS final rule, we issued guidance \9\ stating that
providers may enter a Billing Note NTE02 ``Expand Acc Use'' on the
electronic claim 837I or a remark ``Expand Acc Use'' on a paper claim
to notify the MAC of expanded access use of CAR T-cell therapy. In this
case, the MAC would add payer-only condition code ``ZB'' so that Pricer
will apply the payment adjustment in calculating payment for the case.
In cases when the CAR T-cell therapy product is purchased in the usual
manner, but the case involves a clinical trial of a different product,
the provider may enter a Billing Note NTE02 ``Diff Prod Clin Trial'' on
the electronic claim 837I or a remark ``Diff Prod Clin Trial'' on a
paper claim. In this case, the MAC would add payer-only condition code
``ZC'' so that the Pricer will not apply the payment adjustment in
calculating payment for the case.
---------------------------------------------------------------------------
\9\ https://www.cms.gov/files/document/r10571cp.pdf.
---------------------------------------------------------------------------
In the FY 2022 IPPS/LTCH PPS final rule, we revised MS-DRG 018 to
include cases that report the procedure codes for CAR T-cell and non-
CAR T-cell therapies and other
[[Page 18079]]
immunotherapies (86 FR 44798 through 44806). We also finalized our
proposal to continue to use the proxy of standardized drug charges of
less than $373,000 (86 FR 44965) to identify clinical trial claims. We
also finalized use of this same proxy for the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48894).
Following the issuance of the FY 2023 IPPS/LTCH PPS final rule, we
issued guidance \10\ stating where there is expanded access use of
immunotherapy, the provider may submit condition code ``90'' on the
claim so that Pricer will apply the payment adjustment in calculating
payment for the case. We stated that MACs would no longer append
Condition Code `ZB' to inpatient claims reporting Billing Note NTE02
``Expand Acc Use'' on the electronic claim 837I or a remark ``Expand
Acc Use'' on a paper claim, effective for claims for discharges that
occur on or after October 1, 2022.
---------------------------------------------------------------------------
\10\ https://www.cms.gov/files/document/r11727cp.pdf.
---------------------------------------------------------------------------
In the FY 2024 IPPS/LTCH PPS final rule, we explained that the
MedPAR claims data now includes a field that identifies whether or not
the claim includes expanded access use of immunotherapy. We stated that
for the FY 2022 MedPAR claims data, this field identifies whether or
not the claim includes condition code ZB, and for the FY 2023 MedPAR
data and subsequent years, this field will identify whether or not the
claim includes condition code 90. We further noted that the MedPAR
files now also include a variable that indicates whether the claim
includes the payer-only condition code ``ZC'', which identifies a case
involving the clinical trial of a different product where the CAR T-
cell, non-CAR T-cell, or other immunotherapy product is purchased in
the usual manner.
Accordingly, and as discussed further in the FY 2024 IPPS/LTCH PPS
final rule, we finalized two modifications to our methodology for
identifying clinical trial claims and expanded access use claims in MS-
DRG 018 (88 FR 58791). First, we finalized to exclude claims with the
presence of condition code ``90'' (or, for FY 2024 ratesetting, which
was based on the FY 2022 MedPAR data, the presence of condition code
``ZB'') and claims that contain ICD-10-CM diagnosis code Z00.6 without
payer-only code ``ZC'' that group to MS-DRG 018 when calculating the
average cost for MS-DRG 018. Second, we finalized to no longer use the
proxy of standardized drug charges of less than $373,000 to identify
clinical trial claims and expanded access use cases when calculating
the average cost for MS-DRG 018. Accordingly, we finalized that in
calculating the relative weight for MS-DRG 018 for FY 2024, only those
claims that group to MS-DRG 018 that (1) contain ICD-10-CM diagnosis
code Z00.6 and do not include payer-only code ``ZC'' or (2) contain
condition code ``ZB'' (or, for subsequent fiscal years, condition code
``90'') would be excluded from the calculation of the average cost for
MS-DRG 018. Consistent with this, we also finalized modifications to
our calculation of the adjustment to account for the CAR T-cell therapy
cases identified as clinical trial cases in calculating the national
average standardized cost per case that is used to calculate the
relative weights for all MS-DRGs. We refer readers to the FY 2024 IPPS/
LTCH PPS final rule for further discussion of these modifications (88
FR 58791).
Consistent with the FY 2025 IPPS/LTCH PPS final rule, in this
proposed rule, for FY 2026 we are proposing to continue to use our
methodology as modified in the FY 2024 IPPS/LTCH PPS final rule for
identifying clinical trial claims and expanded access use claims in MS-
DRG 018, with an additional modification as discussed in this section.
First, we exclude claims with the presence of condition code ``90'' and
claims that contain ICD-10-CM diagnosis code Z00.6 without payer-only
code ``ZC'' that group to MS-DRG 018 when calculating the average cost
for MS-DRG 018. Second, we no longer use the proxy of standardized drug
charges of less than $373,000 to identify clinical trial claims and
expanded access use cases when calculating the average cost for MS-DRG
018.
In section VI.H. of this proposed rule, we discuss our proposal to
apply the payment adjustment for clinical trial and expanded access use
immunotherapy cases to other cases where the immunotherapy product is
not purchased in the usual manner, such as obtained at no cost. To
mirror this proposed change within our relative weight methodology, we
are proposing to also exclude claims with standardized drug charges
below the median standardized drug charge of claims identified as
clinical trials in MS-DRG 018 (that is, claims that contain ICD-10-CM
diagnosis code Z00.6 and do not include payer-only code ``ZC'') when we
calculate the average cost for MS-DRG 018. For this proposed rule,
based on the December 2024 update of the FY 2024 MedPAR file, we
estimate that the median standardized drug charge of claims identified
as clinical trials in MS-DRG 018 (that is, claims that contain ICD-10-
CM diagnosis code Z00.6 and do not include payer-only code ``ZC'') is
$29,819. We are proposing to apply this policy for 2 years (that is, in
our relative weight methodology for MS-DRG 018 for FYs 2026 and 2027),
until the claims data reflects the addition of the condition code
indicating that the immunotherapy product is not purchased in the usual
manner, such as obtained at no cost, which then would be able to be
used to identify these cases such that they can be identified for
exclusion from the calculation of the average cost of MS-DRG 018. We
are also proposing, for the purpose of performing this trim, to update
the median standardized drug charge of claims identified as clinical
trials in MS-DRG 018 based on more recent data for the final rule.
Accordingly, we are proposing that in calculating the relative
weight for MS-DRG 018 for FY 2026, in identifying clinical trial claims
and expanded access use claims and other cases where the immunotherapy
product is not purchased in the usual manner, such as obtained at no
cost, only those claims that group to MS-DRG 018 that (1) contain ICD-
10-CM diagnosis code Z00.6 and do not include payer-only code ``ZC'',
(2) contain condition code ``90'', or (3) contain standardized drug
charges below the median standardized drug charge of clinical trial
cases in MS-DRG 018 would be excluded from the calculation of the
average cost for MS-DRG 018.
With respect to claims that group to MS-DRG 018 and are identified
as clinical trials or involve expanded access use of the CAR T-cell
therapy or other immunotherapy, we note that there are some cases that
appear to include drug charges similar to cases not identified as
clinical trials or involving expanded access use. These charges are
generally in revenue center 0891, Cell Therapy Drug Charges. We are
seeking comments on potential reasons for why claims identified as
clinical trials or involving expanded access use, in which the provider
would typically receive the product at no cost, would have charges in
revenue center 0891, Cell Therapy Drug Charges.
We are also proposing to continue to use the methodology as
modified in the FY 2024 IPPS/LTCH PPS final rule to calculate the
adjustment to account for the CAR T-cell therapy cases identified as
clinical trial cases in calculating the national average standardized
cost per case that is used to calculate the relative weights for all
MS-DRGs, with the same proposed modification as described previously to
identify other cases where the immunotherapy product is not
[[Page 18080]]
purchased in the usual manner, such as obtained at no cost:
Calculate the average cost for cases assigned to MS-DRG
018 that (a) contain ICD-10-CM diagnosis code Z00.6 and do not contain
condition code ``ZC'', (b) contain condition code ``90'', or (c)
contain standardized drug charges below the median standardized drug
charge of clinical trial cases in MS-DRG 018.
Calculate the average cost for all other cases assigned to
MS-DRG 018.
Calculate an adjustor by dividing the average cost
calculated in step 1 by the average cost calculated in step 2.
Apply the adjustor calculated in step 3 to the cases
identified in step 1 as applicable clinical trial or expanded access
use cases, and other cases where the immunotherapy product is not
purchased in the usual manner, such as obtained at no cost, then add
this adjusted case count to the non-clinical trial case count prior to
calculating the average cost across all MS-DRGs.
Under our proposal to continue to apply this methodology, with the
proposed modification as described, based on the December 2024 update
of the FY 2024 MedPAR file used for this proposed rule, we estimated
that the average costs of cases assigned to MS-DRG 018 that are
identified as clinical trial cases ($88,484) were 23 percent of the
average costs of the cases assigned to MS-DRG 018 that are identified
as non-clinical trial cases ($385,147). Accordingly, as we did for FY
2025, we are proposing to adjust the transfer-adjusted case count for
MS-DRG 018 by applying the proposed adjustor of 0.23 to the applicable
clinical trial and expanded access use immunotherapy cases, and other
cases where the immunotherapy product is not purchased in the usual
manner, such as obtained at no cost, and to use this adjusted case
count for MS-DRG 018 in calculating the national average cost per case,
which is used in the calculation of the relative weights. Therefore, in
calculating the national average cost per case for purposes of this
proposed rule, each case identified as an applicable clinical trial or
expanded access use immunotherapy case, and other cases where the
immunotherapy product is not purchased in the usual manner, such as
obtained at no cost, was adjusted by 0.23. As we did for FY 2025, we
are applying the same adjustor for the applicable cases that group to
MS-DRG 018 for purposes of budget neutrality and outlier simulations.
We are also proposing to update the value of the adjustor based on more
recent data for the final rule.
d. Cap for Relative Weight Reductions
In the FY 2023 IPPS/LTCH PPS final rule, we finalized a permanent
10-percent cap on the reduction in an MS-DRG's relative weight in a
given fiscal year, beginning in FY 2023. We also finalized a budget
neutrality adjustment to the standardized amount for all hospitals to
ensure that application of the permanent 10-percent cap does not result
in an increase or decrease of estimated aggregate payments. We refer
the reader to the FY 2023 IPPS/LTCH PPS final rule for further
discussion of this policy. In the Addendum to this IPPS/LTCH PPS
proposed rule, we present the proposed budget neutrality adjustment for
reclassification and recalibration of the FY 2026 MS-DRG relative
weights with application of this cap. We are also making available on
the CMS website a supplemental file demonstrating the application of
the permanent 10 percent cap for FY 2026. For a further discussion of
the proposed budget neutrality adjustment for FY 2026, we refer readers
to the Addendum of this proposed rule.
3. Development of National Average Cost-To-Charge Ratios (CCRs)
We developed the proposed national average CCRs as follows:
Using the FY 2023 cost report data, we removed CAHs, REHs, Indian
Health Service hospitals, all-inclusive rate hospitals, and cost
reports that represented time periods of less than 1 year (365 days).
We included hospitals located in Maryland because we include their
charges in our claims database. Then we created CCRs for each provider
for each cost center (see the supplemental data file for line items
used in the calculations) and removed any CCRs that were greater than
10 or less than 0.01. We normalized the departmental CCRs by dividing
the CCR for each department by the total CCR for the hospital for the
purpose of trimming the data. Then we took the logs of the normalized
cost center CCRs and removed any cost center CCRs where the log of the
cost center CCR was greater or less than the mean log plus/minus 3
times the standard deviation for the log of that cost center CCR. Once
the cost report data were trimmed, we calculated a Medicare-specific
CCR. The Medicare-specific CCR was determined by taking the Medicare
charges for each line item from Worksheet D-3 and deriving the
Medicare-specific costs by applying the hospital-specific departmental
CCRs to the Medicare-specific charges for each line item from Worksheet
D-3. Once each hospital's Medicare-specific costs were established, we
summed the total Medicare-specific costs and divided by the sum of the
total Medicare-specific charges to produce national average, charge-
weighted CCRs.
After we multiplied the total charges for each MS-DRG in each of
the 19 cost centers by the corresponding national average CCR, we
summed the 19 ``costs'' across each MS-DRG to produce a total
standardized cost for the MS-DRG. The average standardized cost for
each MS-DRG was then computed as the total standardized cost for the
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The
average cost for each MS-DRG was then divided by the national average
standardized cost per case to determine the relative weight. The
proposed FY 2026 cost-based relative weights were then normalized by an
adjustment factor of 1.92111 so that the average case weight after
recalibration was equal to the average case weight before
recalibration. The normalization adjustment is intended to ensure that
recalibration by itself neither increases nor decreases total payments
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
We then applied the permanent 10-percent cap on the reduction in a MS-
DRG's relative weight in a given fiscal year; specifically for those
MS-DRGs for which the relative weight otherwise would have declined by
more than 10 percent from the FY 2025 relative weight, we set the
proposed FY 2026 relative weight equal to 90 percent of the FY 2025
relative weight. The proposed relative weights for FY 2026 as set forth
in Table 5 associated with this proposed rule and available on the CMS
website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/AcuteInpatientPPS reflect the application of this cap.
The proposed 19 national average CCRs for FY 2026 are as follows:
National Average CCRS
------------------------------------------------------------------------
Group CCR
------------------------------------------------------------------------
Routine Days................................................. 0.395
Intensive Days............................................... 0.341
Drugs and Cellular Therapies................................. 0.179
Supplies & Equipment......................................... 0.304
Implantable Devices.......................................... 0.265
Inhalation Therapy........................................... 0.149
Therapy Services............................................. 0.26
Anesthesia................................................... 0.074
Labor & Delivery............................................. 0.367
Operating Room............................................... 0.156
Cardiology................................................... 0.087
Cardiac Catheterization...................................... 0.100
Laboratory................................................... 0.099
Radiology.................................................... 0.124
MRIs......................................................... 0.066
CT Scans..................................................... 0.032
Emergency Room............................................... 0.141
[[Page 18081]]
Blood and Blood Products..................................... 0.238
Other Services............................................... 0.330
------------------------------------------------------------------------
Since FY 2009, the relative weights have been based on 100 percent
cost weights based on our MS-DRG grouping system.
When we recalibrated the DRG weights for previous years, we set a
threshold of 10 cases as the minimum number of cases required to
compute a reasonable weight. We are proposing to use that same case
threshold in recalibrating the proposed MS-DRG relative weights for FY
2026. Using data from the FY 2024 MedPAR file, there were 10 MS-DRGs
that contain fewer than 10 cases. For FY 2026, because we do not have
sufficient MedPAR data to set accurate and stable cost relative weights
for these low-volume MS-DRGs, we are proposing to compute relative
weights for the low-volume MS-DRGs by adjusting their final FY 2025
relative weights by the percentage change in the average weight of the
cases in other MS-DRGs from FY 2025 to FY 2026. The crosswalk table is
as follows.
Low-Volume MS-DRGS
------------------------------------------------------------------------
Low-volume MS-DRG MS-DRG title Crosswalk to MS-DRG
------------------------------------------------------------------------
010.................... Pancreas Transplant.... Final FY 2025 relative
weight (adjusted by
percent change in
average weight of the
cases in other MS-
DRGs).
096.................... Bacterial and Final FY 2025 relative
Tuberculous Infections weight (adjusted by
of Nervous System percent change in
without CC/MCC. average weight of the
cases in other MS-
DRGs).
218.................... Cardiac Valve and Other Final FY 2025 relative
Major Cardiothoracic weight (adjusted by
Procedures with percent change in
Cardiac average weight of the
Catheterization cases in other MS-
without CC/MCC. DRGs).
789.................... Neonates, Died or Final FY 2025 relative
Transferred to Another weight (adjusted by
Acute Care Facility. percent change in
average weight of the
cases in other MS-
DRGs).
790.................... Extreme Immaturity or Final FY 2025 relative
Respiratory Distress weight (adjusted by
Syndrome, Neonate. percent change in
average weight of the
cases in other MS-
DRGs).
791.................... Prematurity with Major Final FY 2025 relative
Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-
DRGs).
792.................... Prematurity without Final FY 2025 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-
DRGs).
793.................... Full-Term Neonate with Final FY 2025 relative
Major Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-
DRGs).
794.................... Neonate with Other Final FY 2025 relative
Significant Problems. weight (adjusted by
percent change in
average weight of the
cases in other MS-
DRGs).
795.................... Normal Newborn......... Final FY 2025 relative
weight (adjusted by
percent change in
average weight of the
cases in other MS-
DRGs).
------------------------------------------------------------------------
E. Add-On Payments for New Services and Technologies for FY 2026
1. Background
Effective for discharges beginning on or after October 1, 2001,
section 1886(d)(5)(K)(i) of the Act requires the Secretary to establish
a mechanism to recognize the costs of new medical services and
technologies (sometimes collectively referred to in this section as
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the
Act specifies that a medical service or technology will be considered
new if it meets criteria established by the Secretary after notice and
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act
specifies that a new medical service or technology may be considered
for new technology add-on payment if, based on the estimated costs
incurred with respect to discharges involving such service or
technology, the DRG prospective payment rate otherwise applicable to
such discharges under this subsection is inadequate. The regulations at
42 CFR 412.87 implement these provisions and Sec. 412.87(b) specifies
three criteria for a new medical service or technology to receive the
additional payment: (1) the medical service or technology must be new;
(2) the medical service or technology must be costly such that the DRG
rate otherwise applicable to discharges involving the medical service
or technology is determined to be inadequate; and (3) the service or
technology must demonstrate a substantial clinical improvement over
existing services or technologies. In addition, certain transformative
new devices and antimicrobial products may qualify under an alternative
inpatient new technology add-on payment pathway, as set forth in the
regulations at Sec. 412.87(c) and (d).
We note that section 1886(d)(5)(K)(i) of the Act requires the
Secretary to establish a mechanism to recognize the costs of new
medical services and technologies under the payment system established
under that subsection, which establishes the system for paying for the
operating costs of inpatient hospital services. The system of payment
for capital costs is established under section 1886(g) of the Act.
Therefore, as discussed in prior rulemaking (72 FR 47307 through
47308), we do not include capital costs in the add-on payments for a
new medical service or technology or make new technology add-on
payments under the IPPS for capital-related costs.
In this proposed rule, we highlight some of the major statutory and
regulatory provisions relevant to the new technology add-on payment
criteria, as well as other information. For further discussion on the
new technology add-on payment criteria, we refer readers to the FY 2012
IPPS/LTCH PPS final rule (76 FR 51572 through 51574), the FY 2020 IPPS/
LTCH PPS final rule (84 FR 42288 through 42300), and the FY 2021 IPPS/
LTCH PPS final rule (85 FR 58736 through 58742).
a. New Technology Add-On Payment Criteria
(1) Newness Criterion
Under the first criterion, as reflected in Sec. 412.87(b)(2), a
specific medical service or technology will no longer be considered
``new'' for purposes of new medical service or technology add-on
payments after CMS has recalibrated the MS-DRGs, based on available
data, to reflect the cost of the technology. We note that we do not
consider a service
[[Page 18082]]
or technology to be new if it is substantially similar to one or more
existing technologies. That is, even if a medical product receives a
new FDA marketing authorization, it may not necessarily be considered
``new'' for purposes of new technology add-on payments if it is
``substantially similar'' to another medical product that was market
authorized by FDA and has been on the market for more than 2 to 3
years. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813
through 43814), we established criteria for evaluating whether a new
technology is substantially similar to an existing technology,
specifically whether: (1) a product uses the same or a similar
mechanism of action to achieve a therapeutic outcome; (2) a product is
assigned to the same or a different MS-DRG; and (3) the new use of the
technology involves the treatment of the same or similar type of
disease and the same or similar patient population. If a technology
meets all three of these criteria, it would be considered substantially
similar to an existing technology and would not be considered ``new''
for purposes of new technology add-on payments. For a detailed
discussion of the criteria for substantial similarity, we refer readers
to the FY 2006 IPPS final rule (70 FR 47351 through 47352) and the FY
2010 IPPS/LTCH PPS final rule (74 FR 43813 through 43814).
(2) Cost Criterion
Under the second criterion, Sec. 412.87(b)(3) further provides
that, to be eligible for the add-on payment for new medical services or
technologies, the MS-DRG prospective payment rate otherwise applicable
to discharges involving the new medical service or technology must be
assessed for adequacy. Under the cost criterion, consistent with the
formula specified in section 1886(d)(5)(K)(ii)(I) of the Act, to assess
the adequacy of payment for a new technology paid under the applicable
MS-DRG prospective payment rate, we evaluate whether the charges of the
cases involving a new medical service or technology will exceed a
threshold amount that is the lesser of 75 percent of the standardized
amount (increased to reflect the difference between cost and charges)
or 75 percent of one standard deviation beyond the geometric mean
standardized charge for all cases in the MS-DRG to which the new
medical service or technology is assigned (or the case-weighted average
of all relevant MS-DRGs if the new medical service or technology occurs
in many different MS-DRGs). The MS-DRG threshold amounts generally used
in evaluating new technology add-on payment applications for FY 2026
are presented in a data file that is available, along with the other
data files associated with the FY 2025 IPPS/LTCH PPS final rule,
correction notice and interim final action with comment period, on the
CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
We note that, under the policy finalized in the FY 2021 IPPS/LTCH
PPS final rule (85 FR 58603 through 58605), beginning with FY 2022, we
use the proposed threshold values associated with the proposed rule for
that fiscal year to evaluate the cost criterion for all applications
for new technology add-on payments and previously approved technologies
that may continue to receive new technology add-on payments, if those
technologies would be assigned to a proposed new MS-DRG for that same
fiscal year.
As finalized in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41275),
beginning with FY 2020, we include the thresholds applicable to the
next fiscal year (previously included in Table 10 of the annual IPPS/
LTCH PPS proposed and final rules) in the data files associated with
the prior fiscal year. Accordingly, the proposed thresholds for
applications for new technology add-on payments for FY 2027 are
presented in a data file that is available on the CMS website, along
with the other data files associated with this FY 2026 proposed rule,
by clicking on the FY 2026 IPPS Proposed Rule Home Page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.
In the September 7, 2001, final rule that established the new
technology add-on payment regulations (66 FR 46917), we discussed that
applicants should submit a significant sample of data to demonstrate
that the medical service or technology meets the high-cost threshold.
Specifically, applicants should submit a sample of sufficient size to
enable us to undertake an initial validation and analysis of the data.
We also discussed in the September 7, 2001, final rule (66 FR 46917)
the issue of whether the Health Insurance Portability and
Accountability Act (HIPAA) Privacy Rule at 45 CFR part 160 and subparts
A and E of 45 CFR part 164, applies to claims information that
providers submit with applications for new medical service or
technology add-on payments. We refer readers to the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51573) for further information on this issue.
(3) Substantial Clinical Improvement Criterion
Under the third criterion at Sec. 412.87(b)(1), a medical service
or technology must represent an advance that substantially improves,
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries. In the FY 2020 IPPS/LTCH PPS final
rule (84 FR 42288 through 42292), we prospectively codified in our
regulations at Sec. 412.87(b) the following aspects of how we evaluate
substantial clinical improvement for purposes of new technology add-on
payments under the IPPS:
The totality of the circumstances is considered when
making a determination that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries.
A determination that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries means--
++ The new medical service or technology offers a treatment option
for a patient population unresponsive to, or ineligible for, currently
available treatments;
++ The new medical service or technology offers the ability to
diagnose a medical condition in a patient population where that medical
condition is currently undetectable, or offers the ability to diagnose
a medical condition earlier in a patient population than allowed by
currently available methods, and there must also be evidence that use
of the new medical service or technology to make a diagnosis affects
the management of the patient;
++ The use of the new medical service or technology significantly
improves clinical outcomes relative to services or technologies
previously available as demonstrated by one or more of the following: a
reduction in at least one clinically significant adverse event,
including a reduction in mortality or a clinically significant
complication; a decreased rate of at least one subsequent diagnostic or
therapeutic intervention; a decreased number of future hospitalizations
or physician visits; a more rapid beneficial resolution of the disease
process treatment including, but not limited to, a reduced length of
stay or recovery time; an improvement in one or more activities of
daily living; an
[[Page 18083]]
improved quality of life; or, a demonstrated greater medication
adherence or compliance; or
++ The totality of the circumstances otherwise demonstrates that
the new medical service or technology substantially improves, relative
to technologies previously available, the diagnosis or treatment of
Medicare beneficiaries.
Evidence from the following published or unpublished
information sources from within the United States or elsewhere may be
sufficient to establish that a new medical service or technology
represents an advance that substantially improves, relative to services
or technologies previously available, the diagnosis or treatment of
Medicare beneficiaries: clinical trials, peer reviewed journal
articles; study results; meta-analyses; consensus statements; white
papers; patient surveys; case studies; reports; systematic literature
reviews; letters from major healthcare associations; editorials and
letters to the editor; and public comments. Other appropriate
information sources may be considered.
The medical condition diagnosed or treated by the new
medical service or technology may have a low prevalence among Medicare
beneficiaries.
The new medical service or technology may represent an
advance that substantially improves, relative to services or
technologies previously available, the diagnosis or treatment of a
subpopulation of patients with the medical condition diagnosed or
treated by the new medical service or technology.
We refer the reader to the FY 2020 IPPS/LTCH PPS final rule (84 FR
42288 through 42292) for additional discussion of the evaluation of
substantial clinical improvement for purposes of new technology add-on
payments under the IPPS.
We note, consistent with the discussion in the FY 2003 IPPS final
rule (67 FR 50015), that while FDA has regulatory responsibility for
decisions related to marketing authorization (for example, approval,
clearance, etc.), we do not rely upon FDA criteria in our evaluation of
substantial clinical improvement for purposes of determining what
services and technologies qualify for new technology add-on payments
under Medicare. This criterion does not depend on the standard of
safety and effectiveness on which FDA relies but on a demonstration of
substantial clinical improvement in the Medicare population.
b. Alternative Inpatient New Technology Add-On Payment Pathway
Beginning with applications for FY 2021 new technology add-on
payments, under the regulations at Sec. 412.87(c), a medical device
that is part of FDA's Breakthrough Devices Program may qualify for the
new technology add-on payment under an alternative pathway.
Additionally, under the regulations at Sec. 412.87(d) for certain
antimicrobial products, beginning with FY 2021, a drug that is
designated by FDA as a Qualified Infectious Disease Product (QIDP),
and, beginning with FY 2022, a drug that is approved by FDA under the
Limited Population Pathway for Antibacterial and Antifungal Drugs
(LPAD), may also qualify for the new technology add-on payment under an
alternative pathway. We refer the reader to the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42292 through 42297) and the FY 2021 IPPS/LTCH PPS
final rule (85 FR 58737 through 58739) for further discussion on this
policy. We note that CMS reviews the application based on the
information provided by the applicant only under the alternative
pathway specified by the applicant at the time of application
submission. To receive approval for the new technology add-on payment
under that alternative pathway, the technology must have the applicable
FDA designation and meet all other requirements in the regulations in
Sec. 412.87(c) and (d), as applicable.
(1) Alternative Pathway for Certain Transformative New Devices
For applications received for new technology add-on payments for FY
2021 and subsequent fiscal years, a medical device designated under
FDA's Breakthrough Devices Program \11\ that has received FDA marketing
authorization will be considered not substantially similar to an
existing technology for purposes of the new technology add-on payment
under the IPPS, and will not need to meet the requirement under Sec.
412.87(b)(1) that it represent an advance that substantially improves,
relative to technologies previously available, the diagnosis or
treatment of Medicare beneficiaries. Under this alternative pathway, a
medical device that has received a Breakthrough Device designation, and
then received FDA marketing authorization (that is, has been approved
or cleared by, or had a De Novo classification request granted by, FDA)
for the indication covered by the Breakthrough Device designation, will
need to meet the requirements of Sec. 412.87(c). We note that in the
FY 2021 IPPS/LTCH PPS final rule (85 FR 58734 through 58736), we
clarified our policy that a new medical device under this alternative
pathway must receive marketing authorization for the indication covered
by the Breakthrough Devices Program designation. We refer the reader to
the FY 2021 IPPS/LTCH PPS final rule (85 FR 58734 through 58736) for
further discussion regarding this clarification.
---------------------------------------------------------------------------
\11\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------
(2) Alternative Pathway for Certain Antimicrobial Products
For applications received for new technology add-on payments for
certain antimicrobial products, beginning with FY 2021, if a technology
is designated by FDA as a QIDP and received FDA marketing
authorization, and, beginning with FY 2022, if a drug is approved under
FDA's LPAD pathway and used for the indication approved under the LPAD
pathway, it will be considered not substantially similar to an existing
technology for purposes of new technology add-on payments and will not
need to meet the requirement that it represent an advance that
substantially improves, relative to technologies previously available,
the diagnosis or treatment of Medicare beneficiaries. Under this
alternative pathway for QIDPs and LPADs, a medical product that has
received FDA marketing authorization and is designated by FDA as a QIDP
or approved under the LPAD pathway will need to meet the requirements
of Sec. 412.87(d). We refer the reader to the FY 2020 IPPS/LTCH PPS
final rule (84 FR 42292 through 42297) and FY 2021 IPPS/LTCH PPS final
rule (85 FR 58737 through 58739) for further discussion on this policy.
We note that, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58737
through 58739), we clarified that a new medical product seeking
approval for the new technology add-on payment under the alternative
pathway for QIDPs must receive FDA marketing authorization for the
indication covered by the QIDP designation. We also finalized our
policy to expand our alternative new technology add-on payment pathway
for certain antimicrobial products to include products approved under
the LPAD pathway and used for the indication approved under the LPAD
pathway.
c. Additional Payment for New Medical Service or Technology
The new medical service or technology add-on payment policy under
the IPPS provides additional payments for cases with relatively high
[[Page 18084]]
costs involving eligible new medical services or technologies, while
preserving some of the incentives inherent under an average-based
prospective payment system. The payment mechanism is based on the cost
to hospitals for the new medical service or technology. As noted
previously, we do not include capital costs in the add-on payments for
a new medical service or technology or make new technology add-on
payments under the IPPS for capital-related costs (72 FR 47307 through
47308).
For discharges occurring before October 1, 2019, under Sec.
412.88, if the costs of the discharge (determined by applying operating
cost-to-charge ratios (CCRs) as described in Sec. 412.84(h)) exceed
the full DRG payment (including payments for IME and DSH, but excluding
outlier payments), CMS made an add-on payment equal to the lesser of:
(1) 50 percent of the costs of the new medical service or technology;
or (2) 50 percent of the amount by which the costs of the case exceed
the standard DRG payment.
Beginning with discharges on or after October 1, 2019, for the
reasons discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297
through 42300), we finalized an increase in the new technology add-on
payment percentage, as reflected at Sec. 412.88(a)(2)(ii).
Specifically, for a new technology other than a medical product
designated by FDA as a QIDP, beginning with discharges on or after
October 1, 2019, if the costs of a discharge involving a new technology
(determined by applying CCRs as described in Sec. 412.84(h)) exceed
the full DRG payment (including payments for IME and DSH, but excluding
outlier payments), Medicare will make an add-on payment equal to the
lesser of: (1) 65 percent of the costs of the new medical service or
technology; or (2) 65 percent of the amount by which the costs of the
case exceed the standard DRG payment. For a new technology that is a
medical product designated by FDA as a QIDP, beginning with discharges
on or after October 1, 2019, if the costs of a discharge involving a
new technology (determined by applying CCRs as described in Sec.
412.84(h)) exceed the full DRG payment (including payments for IME and
DSH, but excluding outlier payments), Medicare will make an add-on
payment equal to the lesser of: (1) 75 percent of the costs of the new
medical service or technology; or (2) 75 percent of the amount by which
the costs of the case exceed the standard DRG payment. For a new
technology that is a medical product approved under FDA's LPAD pathway,
beginning with discharges on or after October 1, 2020, if the costs of
a discharge involving a new technology (determined by applying CCRs as
described in Sec. 412.84(h)) exceed the full DRG payment (including
payments for IME and DSH, but excluding outlier payments), Medicare
will make an add-on payment equal to the lesser of: (1) 75 percent of
the costs of the new medical service or technology; or (2) 75 percent
of the amount by which the costs of the case exceed the standard DRG
payment. As set forth in Sec. 412.88(b)(2), unless the discharge
qualifies for an outlier payment, the additional Medicare payment will
be limited to the full MS-DRG payment plus 65 percent (or 75 percent
for certain antimicrobial products (QIDPs and LPADs)) of the estimated
costs of the new technology or medical service. We refer the reader to
the FY 2020 IPPS/LTCH PPS final rule (84 FR 42297 through 42300) for
further discussion on the increase in the new technology add-on payment
beginning with discharges on or after October 1, 2019.
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69245
through 69252), we finalized an increase in the new technology add-on
payment percentage, reflected at Sec. 412.88(a)(2)(ii)(C) and
(b)(2)(iv), that for certain gene therapies approved for new technology
add-on payments in the FY 2025 IPPS/LTCH PPS final rule that are
indicated and used specifically for the treatment of sickle cell
disease (SCD), effective with discharges on or after October 1, 2024
and concluding at the end of the 2- to 3-year newness period for such
therapy, if the costs of a discharge (determined by applying CCRs as
described in Sec. [thinsp]412.84(h)) involving the use of such therapy
for the treatment of SCD exceed the full DRG payment (including
payments for IME and DSH, but excluding outlier payments), Medicare
will make an add-on payment equal to the lesser of: (1) 75 percent of
the costs of the new medical service or technology; or (2) 75 percent
of the amount by which the costs of the case exceed the standard DRG
payment. We noted that these payment amounts would only apply to
CasgevyTM (exagamglogene autotemcel) and
LyfgeniaTM (lovotibeglogene autotemcel), when indicated and
used specifically for the treatment of SCD, which were approved for new
technology add-on payments in the FY 2025 IPPS/LTCH PPS final rule (89
FR 69128 through 69135, and 89 FR 69188 through 69196).
We note that, consistent with the prospective nature of the IPPS,
we finalize the new technology add on payment amount for technologies
approved or conditionally approved for new technology add-on payments
in the final rule for each fiscal year and do not make mid-year changes
to new technology add-on payment amounts. Updated cost information may
be submitted and included in rulemaking to be considered for the
following fiscal year.
Section 503(d)(2) of the MMA (Pub. L. 108-173) provides that there
shall be no reduction or adjustment in aggregate payments under the
IPPS due to add-on payments for new medical services and technologies.
Therefore, in accordance with section 503(d)(2) of the MMA, add-on
payments for new medical services or technologies for FY 2005 and
subsequent years have not been subjected to budget neutrality.
d. Evaluation of Eligibility Criteria for New Medical Service or
Technology Applications
In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we
modified our regulation at Sec. 412.87 to codify our longstanding
practice of how CMS evaluates the eligibility criteria for new medical
service or technology add-on payment applications. That is, we first
determine whether a medical service or technology meets the newness
criterion, and only if so, do we then make a determination as to
whether the technology meets the cost threshold and represents a
substantial clinical improvement over existing medical services or
technologies. We specified that all applicants for new technology add-
on payments must have FDA approval or clearance by July 1 of the year
prior to the beginning of the fiscal year for which the application is
being considered. In the FY 2021 IPPS/LTCH PPS final rule, to more
precisely describe the various types of FDA approvals, clearances and
classifications that we consider under our new technology add-on
payment policy, we finalized a technical clarification to the
regulation to indicate that new technologies must receive FDA marketing
authorization 12 13 (such as pre-market approval (PMA);
510(k) clearance; the granting of a De Novo classification request; or
approval of a New Drug Application (NDA) or Biologics License
Application (BLA)) by July 1 of the year prior to the beginning of the
fiscal year for which the application is being considered (85 FR
[[Page 18085]]
58742). Consistent with our longstanding policy, we consider FDA
marketing authorization as representing that a product has received FDA
approval or clearance, or has been granted a De Novo classification
request when considering eligibility for the new technology add-on
payment.
---------------------------------------------------------------------------
\12\ How to Study and Market Your Device https://www.fda.gov/medical-devices/device-advice-comprehensive-regulatory-assistance/how-study-and-market-your-device.
\13\ Types of Applications https://www.fda.gov/drugs/how-drugs-are-developed-and-approved/types-applications.
---------------------------------------------------------------------------
Additionally, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58739
through 58742), we finalized our proposal to provide conditional
approval for new technology add-on payment for a technology for which
an application is submitted under the alternative pathway for certain
antimicrobial products at Sec. 412.87(d) that does not receive FDA
marketing authorization by July 1 prior to the particular fiscal year
for which the applicant applied for new technology add-on payments,
provided that the technology otherwise meets the applicable add-on
payment criteria. Under this policy, cases involving eligible
antimicrobial products would begin receiving the new technology add-on
payment sooner, effective for discharges the quarter after the date of
FDA marketing authorization, provided that the technology receives FDA
marketing authorization before July 1 of the fiscal year for which the
applicant applied for new technology add-on payments.
As discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948
through 58958) and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69242
through 69245), beginning with the new technology add-on payment
applications for FY 2025, for technologies that are not already FDA
market authorized for the indication that is the subject of the new
technology add-on payment application, applicants must have a complete
and active FDA market authorization request at the time of new
technology add-on payment application submission and must provide
documentation of FDA acceptance (for a 510k application or De Novo
Classification request) or filing (for a PMA, NDA, or BLA) to CMS at
the time of application submission, consistent with the type of FDA
marketing authorization application the applicant has submitted to FDA.
See Sec. 412.87(e) and further discussion in the FY 2024 IPPS/LTCH PPS
final rule (88 FR 58948 through 58958) and the FY 2025 IPPS/LTCH PPS
final rule (89 FR 69242 through 69245). As we have discussed in prior
rulemaking, we consider the application to be complete when the full
application has been submitted to FDA and FDA has provided
documentation to the applicant indicating that FDA has determined that
the application is sufficiently complete to allow for substantive
review by FDA. We recognize that FDA processes and documentation may
change over time, and the acceptance or filing documentation may vary
depending on the type of FDA marketing authorization application the
applicant has submitted to FDA. For example, we understand that FDA
considers submission of a 510(k) or De Novo Classification request to
be accepted for substantive review after the completion of either a
refuse to accept (RTA) review or a technical screening
process.14 15 Submissions of 510(k) and De Novo
Classification requests undergo a technical screening process when they
are submitted to FDA using the electronic Submission Template And
Resource (eSTAR) process; 510(k) and De Novo Classification requests
that are not submitted via eSTAR undergo an RTA review. Accordingly,
FDA provides applicants using eSTAR with a review assignment
notification to indicate that FDA has completed its technical screening
process and has determined that the application is sufficiently
complete to allow for substantive review. Therefore, new technology
add-on payment applicants that have submitted a 510(k) application or
De Novo Classification request to FDA through eSTAR must submit a copy
of the review assignment notification to CMS (at the time of new
technology add-on payment application) to establish the application is
sufficiently complete to allow for substantive review by the FDA. We
note that PMAs submitted using eSTAR that complete technical screening
will still undergo a subsequent filing review by FDA, after which an
application is determined to be sufficiently complete to allow for
substantive review; therefore, we continue to require documentation of
FDA filing for these applications.
---------------------------------------------------------------------------
\14\ FDA and Industry Actions on Premarket Notification (510(k))
Submissions: Effect on FDA Review Clock and Goals Guidance for
Industry and Food and Drug Administration Staff Document issued on
October 3, 2022. https://www.fda.gov/media/73507/download.
\15\ FDA and Industry Actions on De Novo Classification
Requests: Effect on FDA Review Clock and Goals Guidance for Industry
and Food and Drug Administration Staff Document issued on October 3,
2022. https://www.fda.gov/media/107652/download.
---------------------------------------------------------------------------
In addition, we recognize that FDA does not conduct a new filing
review for NDA or BLA applications that were the subject of a Complete
Response Letter (CRL) and were subsequently resubmitted to FDA, even
though resubmissions are considered a new review cycle.16 17
Therefore, beginning with the new technology add-on applications
submitted for FY 2027, these new technology add-on payment applicants
must provide to CMS a copy of the resubmission acknowledgement letter
from FDA that indicates that FDA considers the resubmission to be
sufficient to restart a review clock and provides the new goal date for
FDA review of the application. We further note that if there are other
processes not described here, or if there are further changes to FDA's
review processes, consistent with our policy, applicants must provide
to CMS the most up-to-date documentation that indicates FDA has
determined that the application is sufficiently complete to allow for
substantive review by FDA.
---------------------------------------------------------------------------
\16\ SOPP 8405.1: Procedures for Resubmissions to an Application
or Supplement. Version: 8 Effective Date: November 13, 2022. https://www.fda.gov/media/84417/download.
\17\ 21 CFR 314.110, Complete response letter to the applicant
https://www.ecfr.gov/current/title-21/chapter-I/subchapter-D/part-314/subpart-D/section-314.110.
---------------------------------------------------------------------------
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through
58958), we also finalized that, beginning with FY 2025 applications, in
order to be eligible for consideration for the new technology add-on
payment for the upcoming fiscal year, an applicant for new technology
add-on payments must have received FDA marketing authorization by May 1
(rather than July 1) of the year prior to the beginning of the fiscal
year for which the application is being considered (except for an
application that is submitted under the alternative pathway for certain
antimicrobial products), as reflected at Sec. 412.87(f)(2) and (3), as
amended and redesignated in the FY 2024 IPPS/LTCH PPS final rule (88 FR
58948 through 58958, 88 FR 59331).
e. Pharmaceutical & Technology Ombudsman (PTO)
Many interested parties (including device/biologic/drug developers
or manufacturers, industry consultants, others) engage with CMS for
coverage, coding, and payment questions or concerns. In order to
streamline engagement by centralizing the different innovation pathways
within CMS including new technology add-on payments, CMS utilizes the
Pharmaceutical & Technology Ombudsman as an initial resource for
interested parties. This Ombudsman is available to assist with all of
the following:
Help to point interested parties to or provide information
and resources
[[Page 18086]]
where possible regarding process, requirements, and timelines.
As necessary, coordinate and facilitate opportunities for
interested parties to engage with various CMS components.
Serve as a primary point of contact for interested parties
and provide updates on developments where possible or appropriate.
We receive many questions from parties interested in pursuing new
technology add-on payments who may not be entirely familiar with
working with CMS. While we encourage interested parties to first review
our resources available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech, we know that there may
be additional questions about the application process. Interested
parties with further questions regarding Medicare's coverage, coding,
and payment processes, and how they can navigate these processes,
whether for new technology add-on payments or otherwise, should review
the updated resource guide available at: https://www.cms.gov/medicare/coding-billing/guide-medical-technology-companies-other-interested-parties. Parties that would like to further discuss questions or
concerns with CMS should contact the Pharmaceutical & Technology
Ombudsman at [email protected].
f. Application Information for New Medical Services or Technologies
Applicants for add-on payments for new medical services or
technologies for FY 2027 must submit a formal request, including a full
description of the clinical applications of the medical service or
technology and the results of any clinical evaluations demonstrating
that the new medical service or technology represents a substantial
clinical improvement (unless the application is under one of the
alternative pathways as previously described), along with a significant
sample of data to demonstrate that the medical service or technology
meets the high-cost threshold. CMS will review the application based on
the information provided by the applicant under the pathway specified
by the applicant at the time of application submission. Complete
application information, along with final deadlines for submitting a
full application, will be posted as it becomes available on the CMS
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html.
To allow interested parties to identify the new medical services or
technologies under review before the publication of the proposed rule
for FY 2027, once the application deadline has closed, CMS will post on
its website a list of the applications submitted, along with a brief
description of each technology as provided by the applicant.
As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 48986
through 48990), we finalized our proposal to publicly post online new
technology add-on payment applications, including the completed
application forms, certain related materials, and any additional
updated application information submitted subsequent to the initial
application submission (except certain volume, cost and other
information identified by the applicant as confidential), beginning
with the application cycle for FY 2024, at the time the proposed rule
is published. We also finalized that with the exception of information
included in a confidential information section of the application, cost
and volume information, and materials identified by the applicant as
copyrighted or not otherwise releasable to the public, the contents of
the application and related materials may be posted publicly, and that
we will not post applications that are withdrawn prior to publication
of the proposed rule. We refer the reader to the FY 2023 IPPS/LTCH PPS
final rule (87 FR 48986 through 48990) for further information
regarding this policy. Beginning with the new technology add-on
applications submitted for FY 2027, we intend to include certain cost
criterion information in this public posting; however, consistent with
our current policy, cost and volume information will not be publicly
posted. Consistent with current practice, certain cost and volume
information may still be summarized and discussed in the proposed rule,
but we intend to provide more succinct information as part of the
summaries in the proposed and final rules regarding the applicant's
assertions as to how the medical service or technology meets the cost
criterion. Specifically, beginning with the FY 2027 applications, the
public posting will include the applicant's explanation of the cost
analysis methodology, including the step-by-step explanation of the
columns used in the cost analysis spreadsheet attachment, any optional
comments provided by the applicant, and information about the case
weighted threshold and final inflated case weighted standardized charge
per case, as is currently subject to discussion in the cost criterion
analysis for each eligible application in the proposed rule. The cost
analysis spreadsheet attachment and other charge values provided in the
applicant's responses would not be included in the public posting. We
believe that including the described cost criterion information in the
public posting will further improve and streamline our evaluation
process, while also further supporting transparency and engagement with
interested parties.
We note that the burden associated with this information collection
requirement is the time and effort required to collect and submit the
data in the formal request for add-on payments for new medical services
and technologies to CMS. The aforementioned burden is subject to the
PRA and approved under OMB control number 0938-1347 and has an
expiration date of December 31, 2026.
2. Public Input Before Publication of a Notice of Rulemaking on Add-On
Payments
Section 1886(d)(5)(K)(viii) of the Act, as amended by section
503(b)(2) of the MMA, provides for a mechanism for public input before
publication of a notice of proposed rulemaking regarding whether a
medical service or technology represents a substantial clinical
improvement. The process for evaluating new medical service and
technology applications requires the Secretary to do all of the
following:
Provide, before publication of a proposed rule, for public
input regarding whether a new service or technology represents an
advance in medical technology that substantially improves the diagnosis
or treatment of Medicare beneficiaries.
Make public and periodically update a list of the services
and technologies for which applications for add-on payments are
pending.
Accept comments, recommendations, and data from the public
regarding whether a service or technology represents a substantial
clinical improvement.
Provide, before publication of a proposed rule, for a
meeting at which organizations representing hospitals, physicians,
manufacturers, and any other interested party may present comments,
recommendations, and data regarding whether a new medical service or
technology represents a substantial clinical improvement to the
clinical staff of CMS.
In order to provide an opportunity for public input regarding add-
on payments for new medical services and
[[Page 18087]]
technologies for FY 2026 prior to publication of the FY 2026 IPPS/LTCH
PPS proposed rule, we published a notice in the September 13, 2024,
Federal Register (89 FR 74962) and held a virtual town hall meeting on
December 11, 2024. In the announcement notice for the meeting, we
stated that the opinions and presentations provided during the meeting
would assist us in our evaluations of applications by allowing public
discussion of the substantial clinical improvement criterion for the FY
2026 new medical service and technology add-on payment applications
before the publication of the FY 2026 IPPS/LTCH PPS proposed rule.
Approximately 200 individuals attended the virtual town hall
meeting. We posted the recordings of the virtual town hall on the CMS
web page at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech. We considered each applicant's
presentation made at the town hall meeting, as well as written comments
received by the December 16, 2024, deadline, in our evaluation of the
new technology add-on payment applications for FY 2026 in the
development of the FY 2026 IPPS/LTCH PPS proposed rule. In response to
the published notice and the December 11, 2024, New Technology Town
Hall meeting, we received written comments regarding the applications
for FY 2026 new technology add on payments. As explained earlier and in
the Federal Register notice announcing the New Technology Town Hall
meeting (89 FR 74962 through 74964), the purpose of the meeting was
specifically to discuss the substantial clinical improvement criterion
with regard to pending new technology add-on payment applications for
FY 2026. Therefore, we are not summarizing any written comments in this
proposed rule that are unrelated to the substantial clinical
improvement criterion. In section II.E.5. of the preamble of this
proposed rule, we summarize comments regarding individual applications,
or, if applicable, indicate that there were no comments received in
response to the New Technology Town Hall meeting notice or New
Technology Town Hall meeting, at the end of each discussion of the
individual applications.
3. ICD-10-PCS Section ``X'' Codes for Certain New Medical Services and
Technologies
As discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49434),
the ICD-10-PCS includes a new section containing the new Section ``X''
codes, which began being used with discharges occurring on or after
October 1, 2015. Decisions regarding changes to ICD-10-PCS Section
``X'' codes will be handled in the same manner as the decisions for all
of the other ICD-10-PCS code changes. That is, proposals to create,
delete, or revise Section ``X'' codes under the ICD-10-PCS structure
will be referred to the ICD-10 Coordination and Maintenance Committee.
In addition, several of the new medical services and technologies that
have been, or may be, approved for new technology add-on payments may
now, and in the future, be assigned a Section ``X'' code within the
structure of the ICD-10-PCS. We posted ICD-10-PCS Guidelines on the CMS
website at: https://www.cms.gov/medicare/coding-billing/icd-10-codes,
including guidelines for ICD-10-PCS Section ``X'' codes. We encourage
providers to view the material provided on ICD-10-PCS Section ``X''
codes.
4. Proposed FY 2026 Status of Technologies Receiving New Technology
Add-On Payments for FY 2025
In this section of the proposed rule, we discuss the proposed FY
2026 status of 42 technologies approved for 39 new technology add-on
payments for FY 2025, as set forth in the tables that follow.
Specifically, we present our proposals to continue the new technology
add-on payments for FY 2026 for those technologies that were approved
for the new technology add-on payment for FY 2025, and which are still
considered ``new'' for purposes of new technology add-on payments for
FY 2026. We also present our proposals to discontinue new technology
add-on payments for FY 2026 for those technologies that were approved
for the new technology add-on payment for FY 2025, and which are no
longer considered ``new'' for purposes of new technology add-on
payments for FY 2026.
Our policy is that a medical service or technology may continue to
be considered ``new'' for purposes of new technology add-on payments
within 2 or 3 years after the point at which data begin to become
available reflecting the inpatient hospital code assigned to the new
service or technology. Our practice has been to begin and end new
technology add-on payments on the basis of a fiscal year, and we have
generally followed a guideline that uses a 6-month window before and
after the start of the fiscal year to determine whether to extend the
new technology add-on payment for an additional fiscal year, and, in
general, we have extended new technology add-on payments for an
additional year only if the 3-year anniversary date of the product's
entry onto the U.S. market occurs in the latter half of the fiscal year
(70 FR 47362).
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69238
through 69242), we finalized that, beginning with new technology add-on
payments for FY 2026, in assessing whether to continue the new
technology add-on payments for those technologies that are first
approved for new technology add-on payments in FY 2025 or a subsequent
year, we will extend new technology add-on payments for an additional
fiscal year when the 3-year anniversary date of the product's entry
onto the U.S. market occurs on or after October 1 of that fiscal year.
This change is effective beginning with those technologies that are
initially approved for new technology add-on payments in FY 2025 or a
subsequent year. For technologies that were first approved for new
technology add-on payments prior to FY 2025, including for technologies
we determine to be substantially similar to those technologies, we
continue to use the midpoint of the upcoming fiscal year (April 1) when
determining whether a technology would still be considered ``new'' for
purposes of new technology add-on payments.
Table II.E-01.A lists the technologies that were first approved for
new technology add-on payments prior to FY 2025, for which we are
proposing to continue making new technology add-on payments for FY 2026
because they are still considered ``new'' for purposes of new
technology add-on payments because the 3-year anniversary date of the
product's entry onto the U.S. market occurs on or after April 1, 2026.
This table also presents the newness start date, new technology add-on
payment start date, 3-year anniversary date of the product's entry onto
the U.S. market, relevant final rule citations from prior fiscal years,
proposed maximum add-on payment amount, and coding assignments for each
technology. We refer readers to the cited final rules in the following
table for a complete discussion of the new technology add-on payment
application, coding, and payment amount for these technologies,
including the applicable indications and discussion of the newness
start date.
Table II.E-01.B lists the technologies that were first approved for
new technology add-on payments in FY 2025, for which we are proposing
to continue making new technology add-on payments for FY 2026 because
they are still considered ``new'' for purposes of new technology add-on
payments because the 3-year anniversary date of
[[Page 18088]]
the product's entry onto the U.S. market occurs on or after October 1,
2025. This table also presents the newness start date, new technology
add-on payment start date, 3-year anniversary date of the product's
entry onto the U.S. market, relevant final rule citations from prior
fiscal years, proposed maximum add-on payment amount, and coding
assignments for each technology. We refer readers to the cited final
rules in the following table for a complete discussion of the new
technology add-on payment application, coding, and payment amount for
these technologies, including the applicable indications and discussion
of the newness start date.
We are inviting public comments on our proposals to continue new
technology add-on payments for FY 2026 for the technologies listed in
Tables II.E.-01.A and II.E.-01.B.
Table II.E.-01.A--Proposed Continuation of Technologies Approved for FY 2025 New Technology Add-On Payments Still Considered New for FY 2026 Because the
3-Year Anniversary Date Will Occur on or After April 1, 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
3-Year
anniversary Proposed
Technology Newness NTAP start date of entry Previous final rule maximum NTAP Coding used to identify
start date date onto U.S. citations amount for FY cases eligible for NTAP
market 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. CYTALUX[supreg] (pafolacianine) 06/05/2023 10/01/2023 06/05/2026 88 FR 58810 through 58818 $2,762.50 8E0W0EN, 8E0W3EN,
(lung indication). 89 FR 69120 through 69126 8E0W4EN, 8E0W7EN, or
8E0W8EN.
2. EPKINLYTM (epcoritamab-bysp) and 05/19/2023 10/01/2023 05/19/2026 88 FR 58818 through 58835 6,504.07 XW013S9, XW033P9, or
COLUMVITM (glofitamab-gxbm). 89 FR 69120 through 69126 XW043P9.
3. AveirTM AR Leadless Pacemaker...... 06/29/2023 10/01/2023 06/29/2026 88 FR 58919 through 58923 10,725.00 X2H63V9.
89 FR 69120 through 69126
4. AveirTM Dual-Chamber Leadless 06/29/2023 10/01/2023 06/29/2026 88 FR 58923 through 58925 15,600.00 X2H63V9 in combination
Pacemaker. 89 FR 69120 through 69126 with X2HK3V9.
5. Ceribell Status Epilepticus Monitor 05/23/2023 10/01/2023 05/23/2026 88 FR 58927 through 58930 913.90 XX20X89.
89 FR 69120 through 69126
6. DETOUR System...................... 06/07/2023 10/01/2023 06/07/2026 88 FR 58930 through 58932 16,250.00 X2KH3D9, X2KH3E9,
89 FR 69120 through 69126 X2KJ3D9, or X2KJ3E9.
7. DefenCath[supreg] (taurolidine/ 11/15/2023 01/01/2024 11/15/2026 88 FR 58942 through 58944 3,656.10 XY0YX28.
heparin). 89 FR 69120 through 69126
8. Phagenyx[supreg] System............ 04/12/2023 10/01/2023 04/12/2026 88 FR 58935 through 58937 3,250.00 XWHD7Q7.
89 FR 69120 through 69126
9. REZZAYOTM (rezafungin for 07/19/2023 10/01/2023 07/19/2026 88 FR 58944 through 58946 4,387.50 XW033R9 or XW043R9.
injection). 89 FR 69120 through 69126
10. TOPSTM System..................... 06/15/2023 10/01/2023 06/15/2026 88 FR 58940 through 58942 11,375.00 XRHB018 in combination
89 FR 69120 through 69126 with M48.062.
11. XACDURO[supreg] (sulbactam/ 05/23/2023 10/01/2023 05/23/2026 88 FR 58946 through 58948 13,680.00 XW033K9 or XW043K9 in
durlobactam). 89 FR 69120 through 69126 combination with one of
the following: Y95 and
J15.61; OR J95.851 and
B96.83.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table II.E.-01.B--Proposed Continuation of Technologies Approved for FY 2025 New Technology Add-On Payments Still Considered New for FY 2026 Because the
3-Year Anniversary Date Will Occur on or After October 1, 2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
3-Year
anniversary Proposed
Technology Newness NTAP start date of entry Previous final rule maximum NTAP Coding used to identify
start date date onto U.S. citations amount for FY cases eligible for NTAP
market 2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Annalise Enterprise CTB Triage--OH. 10/10/2023 10/01/2024 10/10/2026 89 FR 69205 through 69208 $241.39 XXE0X1A.
2. ASTar[supreg] System............... 04/26/2024 10/01/2024 04/26/2027 89 FR 69208 through 69210 97.50 XXE5X2A.
3. Edwards EVOQUETM Tricuspid Valve 02/01/2024 10/01/2024 02/01/2027 89 FR 69210 through 69213 31,850.00 X2RJ3RA.
Replacement System (``EVOQUETM
System'').
[[Page 18089]]
4. GORE[supreg] EXCLUDER[supreg] 01/12/2024 10/01/2024 01/12/2027 89 FR 69213 through 69215 47,238.75 X2VE3SA.
Thoracoabdominal Branch
Endoprosthesis (TAMBE Device).
5. LimFlowTM System................... 11/01/2023 10/01/2024 11/01/2026 89 FR 69215 through 69218 16,250.00 041M3JS, 041N3JS,
041P3JS, 041Q3JS,
041R3JS, 041S3JS,
041T3JS, or 041U3JS.
6. ParadiseTM Ultrasound Renal 11/7/2023 10/01/2024 11/07/2026 89 FR 69218 through 69221 14,950.00 X051329.
Denervation System.
7. PulseSelectTM Pulsed Field Ablation 12/13/2023 10/01/2024 12/13/2026 89 FR 69221 through 69225 6,337.50 02583ZF.
(PFA) Loop Catheter.
8. Symplicity SpyralTM Multi-Electrode 11/17/2023 10/01/2024 11/17/2026 89 FR 69225 through 69228 10,400.00 X05133A.
Renal Denervation Catheter.
9. TriClipTM G4....................... 04/01/2024 10/01/2024 04/01/2027 89 FR 69228 through 69230 26,000.00 02UJ3JZ.
10. VADER[supreg] Pedicle System...... 02/26/2024 10/01/2024 02/26/2027 89 FR 69230 through 69236 28,242.50 XRH60FA, XRH63FA,
XRH64FA, XRH70FA,
XRH73FA, XRH74FA,
XRH80FA, XRH83FA,
XRH84FA, XRHA0FA,
XRHA3FA, XRHA4FA,
XRHB0FA, XRHB3FA,
XRHB4FA, XRHC0FA,
XRHC3FA, XRHC4FA,
XRHD0FA, XRHD3FA, or
XRHD4FA in combination
with one of the
following: M46.20,
M46.22, M46.23, M46.24,
M46.25, M46.26, M46.27,
M46.30, M46.32, M46.33,
M46.34, M46.35, M46.36,
M46.37, M46.39, M46.40,
M46.42, M46.43, M46.44,
M46.45, M46.46, M46.47,
M46.49, M46.50, M46.51,
M46.52, M46.53, M46.54,
M46.55, M46.56, M46.57,
M46.59, M46.80, M46.82,
M46.83, M46.84, M46.85,
M46.86, M46.87, M46.89,
M46.90, M46.92, M46.93,
M46.94, M46.95, M46.96,
M46.97, or M46.99.
11. ZEVTERATM (ceftobiprole 04/03/2024 10/01/2024 04/03/2027 89 FR 69236 through 69238 2,812.50 XW0335A or XW0435A.
medocaril); ABSSSI and CABP
indications.
12. ZEVTERATM (ceftobiprole 04/03/2024 10/01/2024 04/03/2027 89 FR 69236 through 69238 8,625.00 XW0335A or XW0435A in
medocaril); SAB indication. combination with R78.81
(in combination with
B95.61 or B95.62).
13. CASGEVYTM (exagamglogene 12/08/2023 10/01/2024 12/08/2026 89 FR 69128 through 69135 1,650,000.00 XW133J8 or XW143J8 in
autotemcel); Sickle Cell Disease combination with one of
indication. the following: D57.1,
D57.20, D57.40, D57.42,
D57.44, or D57.80.
14. HEPZATOTM KIT (melphalan for 01/08/2024 10/01/2024 01/08/2027 89 FR 69158 through 69170 118,625.00 XW053T9 in combination
injection/hepatic delivery system). with 5A1C00Z.
15. LYFGENIATM (lovotibeglogene 12/08/2023 10/01/2024 12/08/2026 89 FR 69188 through 69196 2,325,000.00 XW133H9 or XW143H9.
autotemcel).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table II.E.-02 lists the technologies that were first approved for
new technology add-on payments prior to FY 2025, including technologies
determined to be substantially similar to such technologies, for which
we are proposing to discontinue making new technology add-on payments
for FY 2026 because they are no longer ``new'' for purposes of new
technology add-on payments because the 3-year anniversary date of the
product's entry onto the U.S. market occurs before April 1, 2026. This
table also presents the newness start date, new technology add-on
payment start date, the 3-year anniversary date of the product's entry
onto the U.S. market, and relevant final rule citations from prior
fiscal years. We refer readers to the cited final rules in the
following table for a complete discussion of each new technology add-on
payment application and the coding and payment amount for these
technologies, including the applicable indications and discussion of
the newness start date.
[[Page 18090]]
As discussed in section II.E.6. of the preamble of this proposed
rule, BONESUPPORT, Inc. is also seeking new technology add-on payments
for CERAMENT[supreg] G for FY 2026 for use in defects in the
extremities of skeletally mature patients as an adjunct to systemic
antibiotic therapy and surgical debridement as part of the standard
treatment approach to open fractures. As discussed in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 48961 through 48966), CERAMENT[supreg] G was
approved for new technology add-on payments with an indication for use
as a bone void filler in skeletally mature patients as an adjunct to
systemic antibiotic therapy and surgical debridement (standard
treatment approach to a bone infection) as part of the surgical
treatment of osteomyelitis in defects in the extremities. For this
proposed rule, we are proposing to discontinue new technology add-on
payments for FY 2026 for CERAMENT[supreg] G when used for bone
infections, as the technology will no longer be considered new for this
indication. We believe cases involving the use of CERAMENT[supreg] G
related to bone infections, which would no longer be eligible for new
technology add-on payment in FY 2026, would be identified by the ICD-
10-PCS code XW0V0P7 (Introduction of antibiotic-eluting bone void
filler into bones, open approach, new technology group 7) in
combination with the ICD-10-CM codes in category M86 (Osteomyelitis).
We are inviting public comments on the use of these codes to exclude
the indication for use of CERAMENT[supreg] G related to bone
infections, which would not be eligible for the new technology add-on
payment for FY 2026, if approved.
We are inviting public comments on our proposals to discontinue new
technology add-on payments for FY 2026 for the technologies listed in
Table II.E.-02 of the preamble of this proposed rule.
---------------------------------------------------------------------------
\18\ As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR
69149 through 69155), we determined that ELREXFIOTM
(elranatamab-bcmm) and TALVEYTM (talquetamab-tgvs) were
substantially similar to TECVAYLI[supreg] (teclistamab-cqyv), which
was first approved for new technology add-on payment in the FY 2024
IPPS/LTCH PPS final rule (88 FR 58885 through 58891). In accordance
with our policy, because these technologies are substantially
similar to each other, we use the earliest market availability date
submitted as the beginning of the newness period for these
technologies, November 9, 2022, the date TECVAYLI[supreg] became
commercially available. As discussed previously in this section, for
technologies that were first approved for new technology add-on
payments prior to FY 2025, including for technologies we determine
to be substantially similar to those technologies, we continue to
use the midpoint of the upcoming fiscal year (April 1) when
determining whether a technology would still be considered ``new''
for purposes of new technology add-on payments.
Table II.E.-02--Proposed Discontinuation of Technologies Approved for FY 2025 New Technology Add-On Payments No
Longer Considered New for FY 2026 Because 3-Year Anniversary Date Will Occur Prior to April 1, 2026
----------------------------------------------------------------------------------------------------------------
3-Year
anniversary
Technology Newness start NTAP start date of entry Previous final rule
date date onto U.S. citations
market
----------------------------------------------------------------------------------------------------------------
1. ThoraflexTM Hybrid Device.......... 04/19/2022 10/01/2022 04/19/2025 87 FR 48974 through
48975.
88 FR 58800.
89 FR 69120 through
69126.
2. ViviStim[supreg] Paired VNS System. 04/29/2022 10/01/2022 04/29/2025 87 FR 48975 through
48977.
88 FR 58800.
89 FR 69120 through
69126.
3. GORE[supreg] TAG[supreg] Thoracic 05/13/2022 10/01/2022 05/13/2025 87 FR 48966 through
Branch Endoprosthesis. 48969.
88 FR 58800.
89 FR 69120 through
69126.
4. CERAMENT[supreg] G (bone infection 05/17/2022 10/01/2022 05/17/2025 87 FR 48961 through
indication). 48966.
88 FR 58800.
89 FR 69120 through
69126.
5. iFuse Bedrock Granite Implant 05/26/2022 10/01/2022 05/26/2025 87 FR 48969 through
System. 48974.
88 FR 58800.
89 FR 69120 through
69126.
6. CYTALUX[supreg] (pafolacianine) 04/15/2022 10/01/2023 04/15/2025 88 FR 58804 through
(ovarian indication). 58810.
89 FR 69120 through
69126.
7. LunsumioTM (mosunetuzumab)......... 12/22/2022 10/01/2023 12/22/2025 88 FR 58835 through
58845.
89 FR 69120 through
69126.
8. REBYOTATM (fecal microbiota, live- 01/23/2023 10/01/2023 01/23/2026 88 FR 58848 through
jslm) and VOWSTTM (fecal microbiota 58868.
spores, live-brpk). 89 FR 69120 through
69126.
9. SPEVIGO[supreg] (spesolimab)....... 09/01/2022 10/01/2023 09/01/2025 88 FR 58879 through
58885.
89 FR 69120 through
69126.
10. TECVAYLITM (teclistamab-cqyv)..... 11/09/2022 10/01/2023 11/09/2025 88 FR 58885 through
ELREXFIOTM (elranatamab-bcmm) and \18\ 10/01/ 58891.
TALVEYTM (talquetamab-tgvs). 2024 89 FR 69120 through
69126.
89 FR 69149 through
69155.
11. TERLIVAZ[supreg] (terlipressin)... 10/14/2022 10/01/2023 10/14/2025 88 FR 58891 through
58906.
89 FR 69120 through
69126.
12. EchoGo Heart Failure 1.0.......... 11/23/2022 10/01/2023 11/23/2025 88 FR 58932 through
58935.
89 FR 69120 through
69126.
13. SAINT Neuromodulation System...... 09/01/2022 10/01/2023 09/01/2025 88 FR 58937 through
58939.
89 FR 69120 through
69126.
----------------------------------------------------------------------------------------------------------------
5. Proposed FY 2026 Applications for New Technology Add-On Payments
(Traditional Pathway)
As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule,
we finalized our policy to publicly post online applications for new
technology add-on payment beginning with FY 2024 applications (87 FR
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule,
we are continuing to summarize each application in this proposed rule.
However, while we are continuing to provide discussion of the concerns
or issues we identified with respect to applications submitted under
the traditional pathway, we are providing more succinct information as
part of the summaries in the proposed and final rules regarding the
applicant's
[[Page 18091]]
assertions as to how the medical service or technology meets the
newness, cost, and substantial clinical improvement criteria. We refer
readers to https://mearis.cms.gov/public/publications/ntap for the
publicly posted FY 2026 new technology add-on payment applications and
supporting information (with the exception of certain cost and volume
information, and information or materials identified by the applicant
as confidential or copyrighted), including tables listing the ICD-10-CM
codes, ICD-10-PCS codes, and/or MS-DRGs related to the analyses of the
cost criterion for certain technologies for the FY 2026 new technology
add-on payment applications.
We received 19 applications for new technology add-on payments for
FY 2026 under the new technology add-on payment traditional pathway. In
accordance with the regulations under Sec. 412.87(f), applicants for
FY 2026 new technology add-on payments must have received FDA marketing
authorization by May 1 of the year prior to the beginning of the fiscal
year for which the application is being considered. As discussed in the
FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through 58958) and the FY
2025 IPPS/LTCH PPS final rule (89 FR 69242 through 69245), we finalized
that beginning with the new technology add-on payment applications for
FY 2025, for technologies that are not already FDA market authorized
for the indication that is the subject of the new technology add-on
payment application, applicants must have a complete and active FDA
market authorization request at the time of new technology add-on
payment application submission and must provide documentation of FDA
acceptance or filing to CMS at the time of application submission,
consistent with the type of FDA marketing authorization application the
applicant has submitted to FDA. See Sec. 412.87(e) and further
discussion in the FY 2024 and FY 2025 IPPS/LTCH PPS final rules (88 FR
58948 through 58958, 89 FR 69242 through 69245). Of the 19 applications
received under the traditional pathway, 2 applicants were not eligible
for consideration for new technology add-on payment because they did
not meet these requirements, and 3 applicants withdrew their
applications prior to the issuance of this proposed rule. We are
addressing the remaining 14 applications.
a. AUCATZYL[supreg] (Obecabtagene Autoleucel)
Autolus Therapeutics, Inc. submitted an application for new
technology add-on payments for AUCATZYL[supreg] for FY 2026. According
to the applicant, AUCATZYL[supreg] is a fast off-rate cluster of
differentiation 19 (CD19) autologous chimeric antigen receptor (CAR) T-
cell therapy with tumor burden-guided dosing designed to improve
persistence and reduce immune-mediated toxicity. Per the applicant,
AUCATZYL[supreg] is indicated for the treatment of adults with relapsed
or refractory (R/R) B-cell precursor acute lymphoblastic leukemia (B-
ALL).
Please refer to the online application posting for
AUCATZYL[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP241002GUJHV, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
AUCATZYL[supreg] was granted BLA approval from FDA on November 8, 2024,
for the treatment of adults with R/R B-ALL. According to the applicant,
AUCATZYL[supreg] was commercially available immediately after FDA
approval. The applicant stated that a single treatment of
AUCATZYL[supreg] consists of two intravenous infusions (given on Day 1
and Day 10 [2]) administered via a syringe or gravity-
assisted infusion through a central or peripheral venous line over a
few minutes. Per the applicant, each infusion is packaged in three or
more infusion bags containing a cell dispersion of the target tumor
burden-guided dose of 410 x 10\6\ CD19 CAR-positive viable T cells.\19\
---------------------------------------------------------------------------
\19\ The applicant stated that the first dose, infused on Day 1,
is determined by the patient's bone marrow disease burden within 7
days prior to lymphodepletion, and the second dose, infused on Day
10 [2], is tailored for a total dose of 410 x 10\6\ CAR
T cells to complete the single treatment of AUCATYZL[supreg].
---------------------------------------------------------------------------
The applicant stated that, effective October 1, 2024, the following
ICD-10-PCS codes may be used to uniquely describe procedures involving
the use of AUCATZYL:[supreg] XW0338A (Introduction of obecabtagene
autoleucel into peripheral vein, percutaneous approach, new technology
group 10) or XW0438A (Introduction of obecabtagene autoleucel into
central vein, percutaneous approach, new technology group 10). The
applicant stated that C91.00 (Acute lymphoblastic leukemia not having
achieved remission), C91.01 (Acute lymphoblastic leukemia, in
remission), or C91.02 (Acute lymphoblastic leukemia, in relapse) may be
used to currently identify the R/R B-ALL indication for
AUCATZYL[supreg] under the ICD-10-CM coding system.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that AUCATZYL[supreg] is not substantially similar to other
currently available technologies because it has a distinct immune-
modulating mechanism of action and first-in-class tumor burden-guided
dosing indicated for the treatment of adults with R/R B-ALL, and that
therefore, the technology meets the newness criterion. More
specifically, the applicant asserted that AUCATZYL[supreg] is the only
CAR T-cell therapy constructed using the differentiated 4-1BB co-
stimulatory domain with a novel, proprietary low affinity, fast off-
rate CAT19 binding domain, and tumor burden-guided dosing. The
following table summarizes the applicant's assertions regarding the
substantial similarity criteria. Please see the online application
posting for AUCATZYL[supreg] for the applicant's complete statements in
support of its assertion that AUCATZYL[supreg] is not substantially
similar to other currently available technologies.
[[Page 18092]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar No.............................. AUCATZYL[supreg] is not substantially similar to currently available T-
mechanism of action to achieve a therapeutic cell therapies indicated for the treatment of adult R/R B-ALL,
outcome? specifically TECARTUS[supreg] (brexucabtagene autoleucel), the only
currently available CD19 CAR T-cell therapy for this population.
Specifically, AUCATZYL[supreg] is designed to model physiological T-
cell activation, and its CAR is constructed using the differentiated 4-
1BB co-stimulatory domain along with a proprietary and unique CAT19
binding domain, specifically designed to improve potency and
persistence and to reduce immune-mediated toxicity. Shorter cell-cell
contact resulting from the >40-fold lower affinity of CAT19 (off-rate
of 3.7 minutes) compared with the FMC63 antigen-binding domain (off-
rate of 2.8 hours) used in currently available CAR T-cell therapy,
including TECARTUS[supreg], serves to reduce cytokine release and
toxicity, reduces CAR T-cell exhaustion and enhances CAR T-cell
persistence. The 4-1BB co-stimulatory domain is also highly
differentiated from the CD28 co-stimulatory domain used in
TECARTUS[supreg]; the 4-1BB distinct signaling pathway results in
lower T-cell activation, increased mitochondrial biogenesis, greater
oxidative metabolism, and sustained CAR T-cell persistence.
AUCATZYL[supreg] is also specifically designed to follow a manageable,
personalized tumor burden-guided dosing schedule to proactively
mitigate risk of cytokine release syndrome (CRS) and immune effector
cell-associated neurotoxicity syndrome (ICANS), addressing the
potential for toxicity in older patients and for consideration of
patients with higher disease burden. The first-in-class tumor burden-
guided dosing of AUCATZYL[supreg] tailors administration based on the
individual patient's disease burden and corresponding immunotoxicity
risk and supports maximal control for the treating physician, while
minimizing immune-related toxicities and maximizing treatment effect.
Is the technology assigned to the same MS-DRG Yes............................. CMS has made the determination that ICD-10-PCS procedure codes
as existing technologies? identifying all CAR T-cell therapies will map to Pre-MDC MS-DRG 018
(Chimeric antigen receptor (CAR) T-cell and other immunotherapies),
including previously approved TECARTUS[supreg] indicated for adult R/R
B-ALL. Patient claims for adult R/R B-ALL patients where
AUCATZYL[supreg] is administered will also be mapped to Pre-MDC MS-DRG
018 and will be identified by unique, AUCATZYL[supreg]-specific ICD-10-
PCS codes which have been approved by CMS with an effective date of
October 1, 2024.
Does new use of the technology involve the Yes............................. Inpatient cases involving adults with r/r B-ALL are identified by
treatment of the same/similar type of existing ICD-10-CM diagnosis codes C91.00 (Acute lymphoblastic
disease and the same/similar patient leukemia not having achieved remission), C91.01 (Acute lymphoblastic
population when compared to an existing leukemia, in remission), and C91.02 (Acute lymphoblastic leukemia, in
technology? relapse). These same ICD-10-CM diagnosis codes will identify adult R/R
B-ALL patient types eligible for treatment with AUCATZYL[supreg],
where the inpatient claims will be identified by unique
AUCATZYL[supreg] ICD-10-PCS codes, XW0338A or XW0438A, effective
October 1, 2024. Importantly, the eligible patient population for
treatment with AUCATZYL[supreg] is expected to be expanded because of
the substantial clinical benefits of its highly differentiated immune-
modulating mechanism of action and the first-in-class tumor burden-
guided dosing, namely because of a significantly improved safety
profile with very low rates of severe CRS and ICANS and high,
sustained remissions following the single treatment of
AUCATZYL[supreg]. The promise of these clinically meaningful results
after treatment with AUCATZYL[supreg] are especially important for the
older Medicare population, the Hispanic population that faces worse
survival outcomes than patients of other ethnicities, and others with
overall poor health and high disease burden; today, these populations
are either considered ineligible for currently available therapies or
are at elevated risk following treatment or consolidation with
allogenic hemopoietic stem cell transplant (HSCT).
--------------------------------------------------------------------------------------------------------------------------------------------------------
We have the following concerns with regard to the newness
criterion. We note that the applicant asserted that AUCATZYL[supreg]
does not use the same or similar mechanism of action as existing
technologies for R/R B-ALL in adults because AUCATZYL[supreg]'s co-
stimulatory and binding domains differ from those of TECARTUS[supreg],
which the applicant stated is the only other currently available CD19-
directed CAR T-cell immunotherapy for this population. However, we note
that in the FY 2019 IPPS/LTCH PPS final rule (83 FR 41285 through
41291), with regard to the CAR T-cell therapies KYMRIAH[supreg]
(tisagenlecleucel) and YESCARTA[supreg] (axicabtagene ciloleucel), we
stated that although the two technologies were not completely the same
in terms of manufacturing processes, co-stimulatory domains, and
clinical profiles, these differences did not result in different
mechanisms of action, and therefore, inferred that the technologies'
mechanisms of action were the same. Similarly, we question whether
differences in the co-stimulatory and binding domains for
AUCATZYL[supreg] and TECARTUS[supreg] result in the use of a different
mechanism of action. In addition, we note that KYMRIAH[supreg] is also
a CD19-directed CAR T-cell immunotherapy, and it is indicated for the
treatment of patients up to 25 years of age with R/R B-ALL. We believe
that the mechanism of action for all three therapies is the binding to
CD19 by a CAR construct, which results in T-cell activation and killing
of malignant cells in the treatment of B-ALL. Furthermore, while the
applicant also stated that AUCATZYL[supreg]'s personalized tumor
burden-guided dosing schedule is first in class and differentiates it
from other technologies' mechanisms of action, we are unclear how a
technology's dosing schedule is relevant to its mechanism of action.
Accordingly, as it appears that AUCATZYL[supreg], TECARTUS[supreg], and
KYMRIAH[supreg] may use the same or similar mechanism of action to
achieve a therapeutic outcome, are assigned to the same MS-DRG, and
treat the same or similar patient population and disease, that is,
adult patients with R/R B-ALL, we believe that these technologies may
be substantially similar to each other. We note that, per our policy,
if these technologies are substantially similar to each other, we use
the earliest market availability date as the beginning of the newness
period for the technologies. Therefore, if AUCATZYL[supreg] is
substantially similar to TECARTUS[supreg] and KYMRIAH[supreg], we
believe the newness period for this technology would begin on November
22, 2017, the date KYMRIAH[supreg] became commercially available.\20\
In addition, because the 3-year anniversary date of the
KYMRIAH[supreg]'s entry onto the U.S. market (November 22, 2020)
occurred in FY 2021, AUCATZYL[supreg] would no longer be considered new
and would not be eligible for new technology add-on payments for FY
2026. We are interested in information on how these technologies may
differ from each other with respect to the substantial similarity
criteria and newness criterion.
---------------------------------------------------------------------------
\20\ TECARTUS[supreg] received FDA approval on October 1, 2021,
for treatment of adult patients with R/R B-ALL. https://www.fda.gov/drugs/resources-information-approved-drugs/fda-approves-brexucabtagene-autoleucel-relapsed-or-refractory-b-cell-precursor-acute-lymphoblastic.
---------------------------------------------------------------------------
We are inviting public comment on whether AUCATZYL[supreg] meets
the newness criterion, including whether AUCATZYL[supreg] is
substantially similar to TECARTUS[supreg] and KYMRIAH[supreg] for
purposes of new technology add-on payments.
[[Page 18093]]
With respect to the cost criterion, the applicant provided two
analyses to demonstrate that AUCATZYL[supreg] meets the cost criterion.
Each analysis followed the order of operations summarized in the
following table.
AUCATZYL[supreg] Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes, ICD-10-PCS
codes, and MS-DRGs used by the applicant, see the cost criterion codes
and MS-DRGs attachment included in the online posting for
AUCATZYL[supreg].
Claims identified...................... Scenario 1: 349 claims mapping to 9 MS-DRGs, with 56.16% of claims
mapping to MS-DRG 834 (Acute Leukemia with MCC).
Scenario 2: 2,013 claims mapping to 74 MS-DRGs, with 20.22% of claims
mapping to MS-DRG 838 (Chemotherapy with Acute Leukemia as Secondary
Diagnosis with CC or High Dose Chemotherapy Agent).
Charges removed for prior technology... Per the applicant, the utilization of AUCATZYL[supreg] would replace
chemotherapy charges and other CAR-T therapy utilization. The
applicant removed 36.2% and 49.4% of radiology charges for cases in
scenario 1 and 2, respectively. Per the applicant, these percentages
were derived based on an analysis of the revenue center file from the
100% Inpatient SAF in FY 2023, which represent the share of all
radiology charges attributable to chemotherapy, based on percentage of
charges classified as chemotherapy observed in the SAF when ALL was a
diagnosis. In addition, the applicant identified cases with CAR-T
therapies and removed an amount equal to the therapy's wholesale
acquisition cost (WAC) inflated by its estimated CAR-T cost-to-charge
ratio of 0.2643. Finally, the applicant removed all ``Pharmacy
Charges'' for claims with ICD-10-PCS codes of 3E03305 (Introduction of
other antineoplastic into peripheral vein, percutaneous approach) and
3E04305 (Introduction of other antineoplastic into central vein,
percutaneous approach) for other antineoplastics. The applicant did
not remove indirect charges related to the prior technology.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2023 IPPS/LTCH PPS final rule
correcting amendment.
Inflation factor....................... The applicant applied an inflation factor of 8.406% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the
estimated cost of the new technology by its estimated average cost-to-
charge ratio of 0.2643 for CAR T-cell therapies. The applicant did not
add indirect charges related to the new technology.
Cost analysis results.................. Average case-weighted threshold amount: $1,554,026.
Final inflated average case-weighted standardized charge per case:
--Scenario 1: $2,315,730.
--Scenario 2: $2,131,832.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
both scenarios, the applicant asserted that AUCATZYL[supreg] meets the
cost criterion.
We are inviting public comments on whether AUCATZYL[supreg] meets
the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that AUCATZYL[supreg] represents a substantial
clinical improvement over existing technologies because the results of
the phase IB/II FELIX clinical study demonstrated that the
differentiated design of AUCATZYL[supreg] and its first-in-class tumor
burden-guided dosing drive substantial short- and long-term clinically
meaningful improvements in treatment outcomes of adults with R/R B-ALL,
with superior immune-mediated toxicity, thereby, reducing the risk of
patients experiencing life-threatening toxicities in need for intensive
care. The applicant further asserted that AUCATZYL[supreg], as a stand-
alone therapy, may be considered standard of care for adults with R/R
B-ALL. The applicant provided 3 published, peer-reviewed studies, six
unpublished studies or presentations, and the AUCATZYL[supreg]
prescribing information to support these claims, as well as 4
supplementary attachments and 7 background articles about CD19-directed
CAR T-cell therapies, B-ALL-associated survival, and risk factors
associated with access to B-ALL treatments.\21\ The following table
summarizes the applicant's assertions regarding the substantial
clinical improvement criterion. Please see the online posting for
AUCATZYL[supreg] for the applicant's complete statements regarding the
substantial clinical improvement criterion and the supporting evidence
provided.
---------------------------------------------------------------------------
\21\ Background articles are not included in the following table
but can be accessed via the online posting for the technology.
[[Page 18094]]
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments
----------------------------------------------------------------------------------------------------------------
AUCATZYL[supreg] is the first and only autologous Jabbour E, et al. Obecabtagene autoleucel (obe-cel) for
CD19 CAR T-cell therapy with a novel, distinct relapsed/refractory adult B-cell acute lymphoblastic
immune-modulating mechanism of action and first-in- leukemia (r/r B-ALL): impact of chimeric antigen receptor
class tumor burden-guided dosing indicated for T-cell (CAR T) and tumor burden-guided dosing in the
treatment of adult r/r B-ALL. FELIX Phase Ib/II study. Abstract. Society of Hematologic
Oncology. 2024a.
Jabbour E, et al. Obecabtagene Autoleucel (obe-cel, Auto1)
in adults with relapsed/refractory B-cell acute
lymphoblastic leukemia: overall survival, event-free
survival and the potential impact of chimeric antigen
receptor T-cell persistency and consolidative stem cell
transplantation in the open-label single-arm FELIX phase
Ib/II study. Oral presentation; American Society of
Clinical Oncology Annual Meeting, 2024b.
Roddie C, et al. Oral #222; American Society of Hematology
Annual Meeting, 2023a.
The applicant also provided background information to
support this claim, which can be accessed via the online
posting for the technology.
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
Following the single treatment of AUCATZYL[supreg], AUCATZYL prescribing information. www.autolus.com/media/
adult patients with r/r B-ALL experienced high aj4olbsd/aucatzyl-pi-08 nov2024.pdf.
response rates, with superior immune-mediated Ghorashian S, et al. Enhanced CAR T cell expansion and
toxicity compared to currently available CAR T-cell prolonged persistence in pediatric patients with ALL
therapy. treated with a low-affinity CD19 CAR. Nat Med.
2019;25(9):1408-1414.
Jabbour, 2024a, op. cit.
Jabbour, 2024b, op. cit.
Roddie C, et al. Durable responses and low toxicity after
fast off-rate CD19 chimeric antigen receptor-T therapy in
adults with relapsed or refractory B-cell acute
lymphoblastic leukemia. J Clin Oncol. 2021;39(30):3352-
3363.
Roddie, 2023a, op. cit.
Roddie C, et al. Obecabtagene autoleucel in adults with B-
cell acute lymphoblastic leukemia. N Engl J Med 2024a;
DOI:10.1056/NEJMoa2406526.
Roddie C, et al. Risk factors associated with sub-optimal
outcomes following obecabtagene autoleucel (obe-cel) for
relapsed/refractory B-cell acute lymphoblastic leukemia
(R/R B-ALL): What we have learned from the FELIX trial
ASH Annual Meeting. December 2024b.
Shah BD, et al. Healthcare resource utilization and costs
associated with managing CRS and ICANS in patients with
relapsed/refractory adult B-cell acute lymphoblastic
leukemia receiving obecabtagene autoleucel (obe-cel). ASH
Annual Meeting. December 2024.
The applicant also provided background information to
support this claim, which can be accessed via the online
posting for the technology.
Substantially improved CAR T persistence following Day W, et al. Droplet digital PCR and flow cytometry
the single treatment of AUCATZYL[supreg] leads to sensitivity for measuring CAR T-cell kinetics in adult
high, durable remission rates, without the need for patients with relapsed/refractory B-cell acute
consolidative transplant. lymphoblastic leukemia treated with obecabtagene
autoleucel. European Hematology Association Congress.
June 2024. Poster.
Jabbour, 2024b, op. cit.
Jabbour E, et al. Obecabtagene autoleucel (obe-cel) for
adult B-cell acute lymphoblastic leukemia (R/R B-ALL):
deep molecular remission may predict better outcomes. ASH
Annual Meeting. December 2024c.
Park JH, et al. Obecabtagene autoleucel (obe-cel) for
adults with B-cell acute lymphoblastic leukemia (R/R B-
ALL) in the open-label, multi-center, global, single-arm,
phase Ib/II FELIX study: the impact of bridging therapies
on CAR T-cell expansion and persistence. ASH Annual
Meeting. December 2024b.
Roddie C, et al. Long-term efficacy and safety of
obecabtagene autoleucel (obe-cel) in adult patients with
relapsed/refractory B-cell acute lymphoblastic leukemia
(r/r B-ALL); pooled analysis of ALLCAR19 and FELIX Phase
Ib studies) or other B-cell malignancies (ALLCAR19
extension study). Poster 2114. American Society of
Hematology Annual Meeting. 2023b.
Roddie, 2024a, op. cit.
The applicant also provided background information to
support this claim, which can be accessed via the online
posting for the technology.
AUCATZYL[supreg] may be an important, definitive Jabbour, 2024b, op. cit.
stand-alone treatment for adult r/r B-ALL versus Park JH, et al. Relapsed/refractory B-Cell acute
use as a bridging therapy. lymphoblastic leukemia (r/r B-ALL) obecabtagene
autholeucel (obe-cel) consolidative allogeneic stem cell
transplantation. Poster P-008 presented at Lymphoma,
Leukemia and Myeloma Congress (LLM 2024). October 2024a.
Roddie, 2023b, op. cit.
The applicant also provided background information to
support this claim, which can be accessed via the online
posting for the technology.
----------------------------------------------------------------------------------------------------------------
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
AUCATZYL[supreg].
After review of the information provided by the applicant, we have
the following concerns regarding whether AUCATZYL[supreg] meets the
substantial clinical improvement criterion. First, we question whether
there is any patient population with R/R B-ALL that is unresponsive to
or ineligible for any of the currently available treatments for the
condition. We note that under this assertion, the applicant stated that
AUCATZYL[supreg] is the first and only autologous CD19-directed CAR T-
cell therapy with a novel, distinct immune-modulating mechanism of
action and first-in-class tumor burden-guided dosing indicated for the
treatment of adult R/R B-ALL, which produces clinically advantageous
results for these patients over currently available therapies, which
the applicant stated is limited to TECARTUS[supreg] as it is the only
CAR T-cell therapy approved for patients >=26 years old. However, the
comparison of clinical outcomes does not demonstrate that a technology
offers a treatment option for patients who have no other options due to
being ineligible for or unresponsive to existing therapies, nor does
the type of technology or dosing regimen. We note that the applicant
provided three abstracts/presentations describing unpublished results
from the phase Ib/II FELIX trial of AUCATZYL[supreg] as well as various
background studies to support its claim.\22\ The FELIX trial is a
multi-center, open-label, single-arm study that evaluates the efficacy
and safety of AUCATZYL among R/R B-ALL patients, using complete
remission (CR)
[[Page 18095]]
or complete remission with incomplete count recovery (CRi) per
independent response review committee (IRRC) as the primary endpoint.
In particular, the Jabbour et al. (2024a, 2024b) abstract and oral
presentation provided the percent of patients with prior exposure to
various existing treatments, and the Roddie et al. (2023b) presentation
reported the subgroup analysis of clinical outcomes by prior
treatments. However, none of the documents provided described patients
who were unresponsive to or ineligible to receive TECARTUS[supreg].
Further, we note that being the first CAR T-cell therapy for a
particular indication relates to mechanism of action and is not
relevant to the demonstration of substantial clinical improvement. We
also note that there are other treatments available for adult patients
with R/R B-ALL such as Blincyto[supreg] (blinatumomab),
Besponsa[supreg] (inotuzumab ozogamicin), and allogeneic stem cell
transplant (allo-SCT), as well as KYMRIAH[supreg] which is FDA-approved
in adults 18-25. Therefore, we are unclear which R/R B-ALL patients
eligible for AUCATZYL[supreg] are unresponsive to or ineligible for
treatment with any of these existing treatment options.
---------------------------------------------------------------------------
\22\ Jabbour (2024a), op. cit.; Jabbour (2024b), op. cit.;
Roddie (2023a), op. cit.
---------------------------------------------------------------------------
We also question the applicant's assertion that following the
single treatment of AUCATZYL[supreg], adult patients with r/r B-ALL
experienced high response rates, with superior immune mediated toxicity
compared to TECARTUS[supreg]. We note that the applicant provided the
published FELIX trial which demonstrated overall remission [Complete
Response (CR)/Complete Response with incomplete recovery (CRi)] rate of
77 percent and CR of 55 percent in the efficacy-evaluable pivotal
cohort 2A of (n=94) as well as unpublished presentations/abstracts of
the trial which included pooled data for all cohorts, different follow
up periods, and subgroup analyses. The applicant stated that the
response rates for AUCATZYL[supreg] were at least comparable to that
reported for TECARTUS[supreg], and provided the phase 2 single-arm,
open-label ZUMA-3 trial of TECARTUS[supreg], which demonstrated an
overall remission rate and CR of 71 percent and 56 percent,
respectively (n=55). The applicant also stated that the response rates
seen with AUCATZYL[supreg] were achieved with superior immune-mediated
toxicity with low rates of Grade >=3 CRS (2 percent) and/or ICANS (7
percent) compared to TECARTUS[supreg], where Grade >=3 CRS and ICANS
have been observed in 24 percent and 25 percent of patients,
respectively, in clinical studies and 7 percent and 38 percent,
respectively, in real-world studies. However, we question the use of
historical controls for comparing the clinical outcomes of
AUCATZYL[supreg] and TECARTUS[supreg] without adjustments for the
differences between the clinical trials for the two technologies. For
example, there were several differences in baseline demographic and
clinical attributes between FELIX, the pivotal trials for
AUCATZYL[supreg], and ZUMA-3, the pivotal trial for TECARTUS[supreg].
These differences could confound the relationship between the
intervention and clinical outcomes and reduce the validity of the
results if they are not taken into account in the analysis of the
findings. For example, AUCATZYL[supreg] recipients were in general
older (median age: FELIX: 47 years; ZUMA-3: 40 years), had a higher
percent Philadelphia chromosome positive (FELIX: 33 percent; ZUMA-3: 27
percent), had extramedullary disease at screening (FELIX: 25 percent;
ZUMA-3: 11 percent); and had a lower tumor burden (median BM blast
percent at screening: FELIX: 25 percent; ZUMA-3: 60 percent).
AUCATZYL[supreg] recipients included a higher proportion of those
previously treated with inotuzumab ozogamicin \23\ (FELIX: 31 percent;
ZUMA-3: 22 percent), or allo-SCT (FELIX: 58 percent; ZUMA-3: 42
percent), but a lower proportion of those previously exposed to
blinatumomab (FELIX: 39 percent; ZUMA-3: 45 percent).24 25
We question whether these baseline patient attributes in the trials
could have impacted outcomes to the extent that differences between
these attributes would impact comparisons in clinical outcomes between
AUCATZYL[supreg] and TECARTUS[supreg].
---------------------------------------------------------------------------
\23\ Jabbour (2024b), op. cit.
\24\ Jabbour (2024a), op. cit.
\25\ Shah (2021), op. cit.
---------------------------------------------------------------------------
With regard to the applicant's claim that AUCATZYL[supreg] may be
an important, definitive stand-alone treatment for adult r/r B-ALL
versus use as a bridging therapy, we note that among the 99 patients in
the FELIX study who achieved CR or CRi, 40 (40 percent) experienced
ongoing remission with subsequent stem cell transplant (SCT) or other
therapy; 18 (18 percent) received subsequent SCT during remission, five
(5 percent) started new anti-cancer therapy, and the remaining 36
patients (36 percent) either relapsed or died.\26\ We are unclear why
AUCATZYL[supreg] was not a stand-alone treatment for the 23 percent of
patients who underwent SCT or anti-cancer therapy subsequently. We are
interested in the criteria that were used to determine whether a
patient in remission should undergo subsequent SCT or not. Per the
applicant, 17 percent of the patients at high risk for immune effector
cell-associated hematotoxicity (HT), the most common side effect of CAR
T therapy, and 21 percent of those at lower risk for HT proceeded to
undergo allogeneic SCT (allo-SCT).\27\ We welcome information about
factors besides HT that may also be used to inform decisions about the
need for subsequent allo-SCT.
---------------------------------------------------------------------------
\26\ Jabbour (2024b), op. cit.
\27\ Roddie (2024b), op. cit.
---------------------------------------------------------------------------
We are also concerned about potential confounders introduced by
pooling the data from two independent trials with different study
designs, and how those confounders might impact the validity of the
findings related to AUCATZYL[supreg]'s impact on clinical outcomes.
According to the applicant, Roddie et al. (2023b) pooled data from the
ALLCAR19 (N=20) and FELIX trials (N=16).\28\ Per the applicant, the
former was a multicenter, non-randomized open-label Phase 1 study in
patients aged 16 years or older with B-cell malignancies, including B-
ALL. The latter was a global, open-label, single-arm Phase Ib/II study
enrolling patients ages 18 years or older with R/R B-ALL. We are
interested in the differences between the ALLCAR19 and FELIX trials in
terms of eligibility criteria, patients' prior exposure to B-ALL
treatments, co-morbidities, and reasons for attrition. We question
whether, and how, differences were accounted for in the analysis of
clinical outcomes associated with AUCATZYL[supreg].
---------------------------------------------------------------------------
\28\ Roddie (2023b), op. cit.
\29\ National Cancer Institute. Division of Cancer Control &
Population Sciences. Surveillance, Epidemiology, and End Results
(SEER) Surveillance Research Program (chrome-extension://
efaidnbmnnnibpcajpcglclefindmkaj/https://seer.cancer.gov/about/factsheets/SEER_Overview.pdf, accessed 1/23/2025).
\30\ Sasaki K, Jabbour E, and Short NJ et al. Acute
lymphoblastic leukemia: A population-based study of outcome in the
United States based on the surveillance, epidemiology, and end
results (SEER) database, 1980-2017. American Journal of Hematology
2021:96:650.
---------------------------------------------------------------------------
Moreover, we are concerned about the availability of evidence on
AUCATZYL's effects on the outcomes of the Medicare population of those
age 65 years or older. According to a study using National Cancer
Institute's Surveillance, Epidemiology, and End Result (SEER) database,
which drew its data from population-based cancer registries covering 48
percent of the US population,\29\ between 1980 and 2017, while the
majority (57 percent) of B-ALL patients were under the age of 15 years,
13 percent were 60 years of age or older.\30\ We note that the patient
sample in Ghorashian et al. (2019) included those age 19 years or
younger,
[[Page 18096]]
and the patient sample in Roddie et al. (2021) were age 16 years or
older (median: 41.5 years, range: 17 to 62). We also note that the
applicant's substantial clinical improvement claims for
AUCATZYL[supreg] are specific to adults (18 years or older) with R/R B-
ALL. However, the estimated five-year survival of B-ALL patients
decreased from 85 percent for those under the age of 15, to 19 percent
for those between the age of 60 and 69 years, and further to six
percent for those age 70 years or older.\31\ We welcome evidence about
the clinical outcomes of R/R B-ALL patients age 65 years or older who
received AUCATZYL[supreg].
---------------------------------------------------------------------------
\31\ Sasaki (2021), op. cit.
---------------------------------------------------------------------------
In addition, we are unclear whether the CD19-targeting CAR T
therapy discussed in Ghorashian et al. (2019) was identical to
AUCATZYL[supreg] or an earlier version of it. We note that Ghorashian
et al. (2019) discussed a novel CD19 CAR (CAT-41BBz CAR),\32\ and
Roddie et al. (2021) stated that they developed a novel second
generation CD19-CAR (CAT19-41BB-Z) with a fast off rate.\33\ We welcome
information about how the technology in Ghorashian et al. (2019)
compares with AUCATZYL[supreg].
---------------------------------------------------------------------------
\32\ Ghorashian (2019), op. cit.
\33\ Roddie (2021), op. cit.
---------------------------------------------------------------------------
With regard to the applicant's assertion that AUCATZYL[supreg]
represents a substantial clinical improvement because it substantially
improves CAR T-cell persistence, we note that this relates to surrogate
endpoints rather than clinical outcomes. The applicant provided the Day
presentation (2024) which examined the association between CAR T-cell
persistence and event-free survival among patients who received
AUCATZYL[supreg] at six month post infusion.\34\ However, we note that
while the applicant stated persistence of CAR T-cells is associated
with improved event-free survival, CAR T-cell persistence is a
surrogate measure and does not assess a clinical outcome as described
under the regulations at Sec. 412.87(b)(1)(ii)(C).
---------------------------------------------------------------------------
\34\ Day (2024), op. cit.
---------------------------------------------------------------------------
In addition, we note that the applicant only asserted improved
outcomes for AUCATZYL[supreg] over TECARTUS[supreg], and we did not
receive any evidence comparing AUCATZYL[supreg] with other currently
available treatments for adults with R/R B-ALL such as KYMRIAH[supreg]
(approved in adults 18-25), as well as non-CAR T-cell therapies
described previously, to demonstrate improved clinical outcomes. We
welcome additional information comparing these therapies with
AUCATZYL[supreg] in order to demonstrate that it provides a substantial
clinical improvement over existing therapies.
We are inviting public comments on whether AUCATZYL[supreg] meets
the substantial clinical improvement criterion.
b. AURLUMYNTM (Iloprost Injection)
SERB Pharmaceuticals submitted an application for new technology
add-on payments for AURLUMYNTM for FY 2026. According to the
applicant, AURLUMYNTM is an intravenous form of iloprost
associated with immediate generalized vasodilation, immunomodulation,
and anti-inflammation indicated for the treatment of severe frostbite
in adults to reduce the risk of digit amputations.
Please refer to the online application posting for AURLUMYN\TM\,
available at https://mearis.cms.gov/public/publications/ntap/NTP241007QK29V, for additional detail describing the technology and the
disease treated by the technology.
With respect to the newness criterion, according to the applicant,
FDA granted NDA approval for AURLUMYN\TM\ on February 13, 2024, for the
treatment of severe frostbite in adults to reduce the risk of digit
amputations. Per the applicant, the commercial launch of AURLUMYN\TM\
was delayed until the NDA sponsor could secure a capable commercial
partner. Per the applicant, it acquired AURLUMYN\TM\ globally on
October 18, 2024, and prepared for launch aligned with the beginning of
the winter season. The applicant stated that the technology became
available for sale on November 12, 2024. We are interested in
additional information regarding the cause of any delay in the
technology's commercial availability, including additional details
about the preparation for launch that aligned with the beginning of the
winter season.
According to the applicant, AURLUMYN\TM\ is administered as a
continuous intravenous (IV) infusion over 6 hours per day, increased in
increments up to a maximum dose of 2 ng/kg/minute, for up to a maximum
of 8 consecutive days. The applicant expects that AURLUMYN\TM\ will be
dosed in the inpatient setting for 8 consecutive days using a total of
eight single-use vials (one per day).
According to the applicant, there are currently no ICD-10-PCS
procedure codes to distinctly identify AURLUMYN\TM\. We note that the
applicant submitted a request for a unique ICD-10-PCS procedure code
for AURLUMYN\TM\ beginning in FY 2026. The applicant provided a list of
diagnosis codes that may be used to currently identify the indication
for AURLUMYN\TM\ under the ICD-10-CM coding system. Please refer to the
online application posting for the complete list of ICD-10-CM codes
provided by the applicant.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that AURLUMYN\TM\ is not substantially similar to other
currently available technologies because it is the first-ever FDA-
approved treatment for frostbite of any grade and is specifically
indicated for the treatment of severe frostbite in adults to reduce the
risk of finger or toe amputation, and therefore, the technology meets
the newness criterion. The following table summarizes the applicant's
assertions regarding the substantial similarity criteria. Please see
the online application posting for AURLUMYN\TM\ for the applicant's
complete statements in support of its assertion that AURLUMYN\TM\ is
not substantially similar to other currently available technologies.
[[Page 18097]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... AURLUMYN\TM\ is the only IV form of iloprost available in the U.S.
action to achieve a therapeutic outcome? AURLUMYN\TM\ is a stable synthetic analog of PGI2 and is a potent
prostacyclin receptor agonist. Upon binding to the prostacyclin
receptor, prostacyclin inhibits platelet activation and acts as a
vasodilator. AURLUMYN\TM\ is associated with immediate generalized
vasodilation, immunodulation, and anti-inflammation. AURLUMYN\TM\
has been associated with reductions in neutrophil adhesion and
chemotaxis as well as downregulation of intracellular expression
of IL-6 and TNF alpha in human monocytes. In addition,
AURLUMYN\TM\ has been shown to enhance fibrinolysis, increase red
cell deformability, and reduce white cell adhesion to endothelial
cells. AURLUMYN\TM\ has also demonstrated activity with respect to
increasing cAMP levels in human platelets via stimulation of
adenylate cyclase, with resultant inhibition of platelet
aggregation. AURLUMYN\TM\ inhibits arachidonic acid-induced
vasoconstriction, which may be explained by its ability to
counteract thromboxane. As a result of these properties,
AURLUMYN\TM\ may mitigate vasoconstriction and microthrombosis to
limit frostbite injury. Previously, access to medical frostbite
treatment in the U.S. has been limited to agents not specifically
studied or approved for frostbite. AURLUMYN\TM\ is not
substantially similar to those agents used in case study and
anecdotal reports, including nonsteroidal anti-inflammatory drugs,
heparin, antibiotics, dextran, tetanus toxoid, immune globulin,
antiplatelet agents, and anticoagulant therapy. AURLYMN\TM\ is
also significantly differentiated from VENTAVIS[supreg] (iloprost)
inhalation solution approved in 2004, and since discontinued, for
the chronic treatment of pulmonary arterial hypertension and
intended to be chronically administered.
Is the technology assigned to the same MS-DRG as existing No..................... The 2023 MedPAR file contains no patient cases assigned to any MS-
technologies? DRG representing frostbite cases treated with an FDA-approved
therapy for severe frostbite. AURLUMYN\TM\ is the first-ever FDA-
approved treatment for frostbite of any grade. It is expected
AURLUMYN\TM\ administration cases will map to MS-DRGs based on the
MS-DRG assignment logic for the case-specific diagnosis or
procedural codes.
Does new use of the technology involve the treatment of No..................... AURLUMYN\TM\ is the first-ever FDA-approved treatment for frostbite
the same/similar type of disease and the same/similar of any grade and is specifically approved for the treatment of
patient population when compared to an existing severe frostbite in adults to reduce the risk of finger or toe
technology? amputation.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We note that the applicant asserted that AURLUMYN\TM\ is not
assigned to the same MS-DRG as existing technologies. However, as the
applicant also stated that AURLUMYN\TM\ will map to MS-DRGs based on
diagnosis/procedure codes, we believe that the use of AURLUMYN\TM\ will
not change the MS-DRG assignment and will, therefore, map to the same
MS-DRGs as other treatments for severe frostbite. In addition, while
the applicant asserted that AURLUMYN\TM\ does not treat the same or
similar type of disease and the same or similar patient population as
existing treatments because it is the first-ever FDA-approved treatment
for frostbite, we note that there are other severe frostbite treatments
that are commonly used including rapid rewarming, fasciotomy,
thrombolysis, and sympathectomy.
We are inviting public comments on whether AURLUMYN\TM\ is
substantially similar to existing technologies and whether AURLUMYN\TM\
meets the newness criterion.
With respect to the cost criterion, the applicant provided multiple
analyses to demonstrate that AURLUMYN\TM\ meets the cost criterion.
Each analysis followed the order of operations summarized in the
following table.
AURLUMYN\TM\ Cost Analysis
------------------------------------------------------------------------
------------------------------------------------------------------------
Inclusion/exclusion criteria. For the Inclusion/Exclusion criteria used
in the Cost Analysis, including the data
source and lists of ICD-10-CM codes and
MS-DRGs used by the applicant, see the
cost criterion codes and MS-DRGs
attachment included in the online
posting for AURLUMYN\TM\.
Claims identified............ Scenario 1: 103 claims mapping to nine MS-
DRGs, with none of the MS-DRGs exceeding
13.59% of the total identified cases.
Scenario 2: 159 claims mapping to 11 MS-
DRGs, with 22.64% of claims mapping to
MS-DRG 923 (Other Injury, Poisoning and
Toxic Effect Diagnoses without CC).
Charges removed for prior The applicant stated that no charges were
technology. removed for a prior technology as a
result of using AURLUMYN\TM\, and that
there were no indirect charges related
to a prior technology to be removed.
Standardized charges......... The applicant used the standardization
formula provided in Appendix A of the
application. The applicant used all
relevant values reported in the impact
file posted with the FY 2023 IPPS/LTCH
PPS final rule correcting amendment.
Inflation factor............. The applicant applied an inflation factor
of 8.4% to the standardized charges,
based on the inflation factor used to
calculate outlier threshold charges in
the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new For both scenarios 1 and 2, the applicant
technology. added charges for the new technology by
dividing the average cost of the new
technology per inpatient stay by the
national average cost-to-charge ratio of
0.178 for Drugs and Cellular Therapies
from the FY 2025 IPPS/LTCH PPS final
rule. The applicant did not add indirect
charges related to the new technology.
[[Page 18098]]
Cost analysis results........ Scenario 1:
--Average case-weighted threshold amount:
$87,166.
--Final inflated average case-weighted
standardized charge per case: $353,509.
Scenario 2:
--Average case-weighted threshold amount:
$73,762.
--Final inflated average case-weighted
standardized charge per case: $328,186.
------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
both scenarios, the applicant asserted that AURLUMYN\TM\ meets the cost
criterion.
We are inviting public comments on whether AURLUMYN\TM\ meets the
cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that AURLUMYN\TM\ represents a substantial clinical
improvement over existing technologies because AURLUMYN\TM\
substantially lowers the risk of digit amputation in severe frostbite
cases. Additionally, the applicant claimed that, by reducing the risk
of finger and toe amputations in adults with severe frostbite,
AURLUMYN\TM\ mitigates debilitating, lifelong health-related,
functional, and work-related impacts associated with digit amputation.
The applicant provided four documents, including two studies and
clinical practice guidelines to support these claims, as well as two
background articles about a classification system for frostbite
severity and the prevention and clinical treatment of frostbite.\35\
The following table summarizes the applicant's assertions regarding the
substantial clinical improvement criterion. Please see the online
posting for AURLUMYN\TM\ for the applicant's complete statements
regarding the substantial clinical improvement criterion and the
supporting evidence provided.
---------------------------------------------------------------------------
\35\ Background articles are not included in the following table
but can be accessed via the online posting for the technology.
------------------------------------------------------------------------
Supporting evidence provided by the
Applicant statements in support applicant
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a
treatment option for a patient population unresponsive to, or ineligible
for, currently available treatments
------------------------------------------------------------------------
AURLUMYN\TM\ is the first-ever Cauchy E, et al. A controlled trial
medical treatment for frostbite of a prostacyclin and rt-PA in the
approved by the FDA and is treatment of severe frostbite. N
specifically approved for Engl J Med 2011;364, 189-190.
treatment of severe frostbite to Crooks S, et al. Effectiveness of
reduce the risk of digit intravenous prostaglandin to reduce
amputations. digital amputations from frostbite:
an observational study. Canadian
Journal of Emergency Medicine
2022;24, 622-629.
McIntosh SE, et al. Wilderness
Medical Society Clinical Practice
Guidelines for the Prevention and
Treatment of Frostbite. 2019
Update. Wilderness & Environmental
Medicine 2019;30, S19-S32.
McIntosh SE, et al. Wilderness
Medical Society Clinical Practice
Guidelines for the Prevention and
Treatment of Frostbite: 2024
Update. Wilderness & Environmental
Medicine 2024;35(2) 183-197.
The applicant also provided
background information to support
this claim, which can be accessed
via the online posting for the
technology.
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology
significantly improves clinical outcomes relative to services or
technologies previously available
------------------------------------------------------------------------
AURLUMYN\TM\ reduces the risk of Cauchy, 2011, op. cit.
amputation of fingers and toes in Crooks, 2022, op. cit.
adults with severe frostbite, McIntosh, 2019, op. cit.
mitigating debilitating, lifelong McIntosh, 2024, op. cit.
health-related, functional and
work-related impacts of digit
amputation.
------------------------------------------------------------------------
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
AURLUMYN\TM\.
After review of the information provided by the applicant, we have
the following concerns regarding whether AURLUMYN\TM\ meets the
substantial clinical improvement criterion. With respect to the claim
that AURLUMYN\TM\ offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments, we
note that the applicant stated that AURLUMYN\TM\ is the first-ever FDA-
approved medical treatment for severe frostbite to reduce the risk of
digit amputations, but did not identify a patient group that is
unresponsive to, or ineligible for, the standard-of-care treatment,
where AURLUMYN\TM\ does offer a treatment option.
The applicant provided two published studies that used AURLUMYN\TM\
to support this claim (Cauchy et al., 2011; Crooks et al., 2022).
Cauchy et al. (2011), which was published as a letter to the editor, is
a single site, open-label trial which randomized 47 healthy patients
(aged 18 to 55 years) with severe frostbite after mountain rescue in
France to receive either buflomedil, AURLUMYN\TM\, or AURLUMYN\TM\ plus
recombinant tPA (rtPA), and assessed treatment efficacy based on bone
scan scintigraphy to determine risk of amputation. The second study
(Crooks et al., 2022) was a retrospective cohort study consisting of a
medical records review in Calgary, Canada, a large city inclusive of an
unhoused population. The study excluded patients due to superficial or
grade 1 frostbite, resulting in 90 patients
[[Page 18099]]
with an interquartile age range of 31 to 53 years old. For frostbite
treatment, these patients received either AURLUMYN\TM\ or the standard
of care, which consisted of the local best practice without
AURLUMYN\TM\. While these two studies compared treatment of patients
with severe frostbite using AURLUMYN\TM\ to other treatments, neither
study described a patient group that is unresponsive to, or ineligible
for, existing treatment options where AURLUMYN\TM\ offers treatment. We
further note that while the applicant also cited the Wilderness Medical
Society Practice Guidelines (McIntosh et al., 2024) which included a
strong recommendation for iloprost as the first-line treatment for
severe (grades 3 and 4) frostbite less than 48 hours after thawing, and
possibly for up to 72 hours post-thawing,\36\ the full statement in the
Guidelines is that intravenous iloprost should be considered first-line
therapy for grade 3 and 4 frostbite <72 hours after injury, when tPA is
contraindicated, and in austere environments where tPA infusion is
considered risky or evacuation to a treatment facility will be delayed.
Additionally, the guidelines include other recommendations for
treatments such as sympathectomy, fasciotomy, and hydrotherapy.
Therefore, it appears that there are other treatment options for
frostbite other than AURLUMYN\TM\. We would appreciate any additional
information regarding which patient population AURLUMYN\TM\ can treat
for severe frostbite, for which other existing treatments could not be
used.
---------------------------------------------------------------------------
\36\ McIntosh, S.E., Freer, L., Grissom, C.K., Rodway, G.W.,
Giesbrecht, G.G., McDevitt, M., Imray, C.H., Johnson, E.L., Pandey,
P., Dow, J., & Hackett, P.H. (2024). Wilderness Medical Society
Clinical Practice Guidelines for the Prevention and Treatment of
Frostbite: 2024 Update. Wilderness & Environmental Medicine, 35(2).
https://doi.org/10.1177/10806032231222359.
---------------------------------------------------------------------------
With respect to the claim that AURLUMYN\TM\ significantly improves
clinical outcomes relative to services or technologies previously
available, the applicant stated that AURLUMYN\TM\ reduces the risk of
amputation of fingers and toes in adults with severe frostbite,
mitigating debilitating, lifelong health-related, functional, and work-
related impacts of digit amputation. To support this claim, the
applicant provided the two published studies and Wilderness Medical
Society Practice Guidelines previously discussed (Cauchy et al., 2011;
Crooks et al., 2022; McIntosh et al., 2024). The Cauchy et al. (2011)
study found that the 16 patients treated with AURLUMYN\TM\ without rtPA
resulted in no amputations, whereas the risk of amputation was greater
in patients treated with buflomedil (60 percent, 9 of 15 patients) and
patients treated with AURLUMYN\TM\ plus rtPA (19 percent, 3 of 16
patients). The Crooks et al. (2022) study found that 18 percent of
grade 3 frostbite injuries and 46 percent of grade 4 frostbite injuries
treated with AURLUMYN\TM\ resulted in digital amputation, compared to
the standard of care groups where 44 percent of grade 3 frostbite
injuries and 95 percent of grade 4 frostbite injuries resulted in
amputations. However, we question whether the composition of the
AURLUMYN\TM\ and standard of care treatment groups in these two
published studies were sufficiently comparable and, consequently,
whether outcomes demonstrated are clinically significant. Specifically,
we question the accuracy of severity grading determinations and the
resulting randomization process used to group patients in both studies
due to the subjective nature of grading frostbite injuries that can
evolve over time, and being that the grading of frostbite injuries in
Crooks et al. (2022) was conducted using photographs and clinician
health descriptions in the local electronic health record. We also note
that, in Crooks et al. (2022), no patients in the control group were
treated with tPA, despite tPA and heparin being available for severe
injuries during the period of treatment with standard frostbite care.
The absence of tPA in the control group raises questions about the
adequacy of the comparator, given that the Wilderness Medical Society
Practice Guidelines recommend tPA for select severe frostbite cases
where timely administration is feasible. We also question the extent to
which the quality of frostbite care in the control group may have
varied, prior to the implementation of the protocol that implemented 5-
day iloprost infusion. In addition, while the utility of
recommendations in establishing evidence of clinically improved
outcomes is limited, we further note that neither study provided direct
comparison with therapies that are also strongly recommended by the
Wilderness Medical Society, such as fasciotomy and hydrotherapy, or
with other therapies that may have limited data availability, such as
sympathectomy and hyperbaric oxygen therapy.
We also have concerns about the generalizability of the Cauchy et
al. (2011) and Crooks et al. (2022) studies to the Medicare population.
We note that Cauchy et al. (2011) studied AURLUMYN\TM\ treatment in
patients in France, whose mean age was 33.1 years and who had no
notable medical or surgical history. As noted in the Crooks et al.
(2022) study, which studied patients from a large Canadian city with a
substantial unhoused population, the effects may not be as dramatic as
results in other studies, owing to the differences in medical and
social comorbidities in the study population. Similarly, the Medicare
population may have significant differences from the Cauchy et al.
(2011) study population, in physical and mental health and social
complexities. We also question whether efficacy data from Cauchy et al.
(2011) is generalizable to the Medicare population due to the study's
location, small patient population, and patients' age. We note that
these two published studies assessing AURLUMYN\TM\ were both conducted
outside of the U.S and primarily included patients under the age of 55
years (range: 18 to 55 and 29 to 54 years, respectively). As noted in
the AURLUMYN\TM\ prescribing information, clinical studies included
insufficient numbers of patients aged 65 years and older to determine
whether they respond differently than younger subjects.\37\
---------------------------------------------------------------------------
\37\ Eicos Sciences, Inc. Prescribing Information for
AURLUMYN\TM\ (iloprost) injection, for intravenous use (revised 5/
2024), section 8.5 Geriatric Use. Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2024/217933s000lbl.pdf.
---------------------------------------------------------------------------
We are inviting public comments on whether AURLUMYN\TM\ meets the
substantial clinical improvement criterion.
c. BREYANZI[supreg] (Lisocabtagene Maraleucel)
Bristol Myers Squibb submitted an application for new technology
add-on payments for BREYANZI[supreg] for FY 2026. According to the
applicant, BREYANZI[supreg] is a CD19-directed, autologous CAR T-cell
immunotherapy comprised of individually formulated CD8 and CD4 CAR T-
cells, and it is indicated for the treatment of adult patients with
relapsed/refractory (R/R) chronic lymphocytic leukemia or small
lymphocytic lymphoma (CLL/SLL) who have received two or more prior
lines of therapy (LOTs), including a Bruton tyrosine kinase inhibitor
(BTKi) and a B-cell lymphoma 2 protein inhibitor (BCL2i). We note that
BREYANZI[supreg] is also indicated for the treatment of adult patients
with R/R large B-cell lymphoma, for which the applicant submitted an
application for new technology add-on payments for FY 2021 and FY 2022,
as discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 44996
through 45008).
Please refer to the online application posting for
BREYANZI[supreg], available at https://mearis.cms.gov/public/
[[Page 18100]]
publications/ntap/NTP24100722KTJ, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
BREYANZI[supreg] was granted accelerated approval for its supplemental
Biologics License Application (sBLA) by FDA on March 14, 2024 for the
treatment of adult patients with R/R CLL or SLL who have received two
or more prior LOTs including a BTKi and a BCL2i.\38\ According to the
applicant, BREYANZI[supreg] was commercially available immediately
after FDA marketing authorization for the CLL/SLL indication. Per the
applicant, for this indication, patients receive a one-time intravenous
infusion of BREYANZI[supreg], which contains 90 to 110 x 10\6\ CAR-
positive viable T-cells consisting of 1:1 CAR-positive viable T-cells
of the CD8 and CD4 components, with each component supplied separately
in one or more single-dose vials.
---------------------------------------------------------------------------
\38\ Breyanzi. United States Prescribing Information (USPI),
(revised 5/2024). According to the applicant, FDA has also approved
BREYANZI[supreg] for several other indications, including for the
treatment of adults with (1) R/R follicular lymphoma (FL) who have
received two or more prior LOT (approved on 5/15/2024); (2) R/R
mantle cell lymphoma (MCL) who have received at least two prior LOT,
including a BTKi (approved on 5/30/2024); (3) R/R large B-cell
lymphoma (LBCL) after two or more LOT, including diffuse large B-
cell lymphoma (DLBCL) not otherwise specified (including DLBCL
arising from indolent lymphoma), high-grade B-cell lymphoma, primary
mediastinal LBCL, and FL grade 3B (approved on 2/5/2021); and (4)
LBCL, including DLBCL, not otherwise specified (including DLBCL
arising from indolent lymphoma), high-grade B-cell lymphoma, primary
mediastinal LBCL, and FL grade 3B, who have either refractory
disease to first-line chemoimmunotherapy or relapse within 12 months
of first-line chemoimmunotherapy or refractory disease to first-line
chemoimmunotherapy or relapse after first-line chemoimmunotherapy
and are not eligible for hematopoietic stem cell transplant (HSCT)
due to comorbidities or age (approved on 6/24/2022). (https://www.fda.gov/vaccines-blood-biologics/cellular-gene-therapy-products/breyanzi-lisocabtagene-maraleucel, accessed 3/27/2025).
---------------------------------------------------------------------------
The applicant stated that, effective October 1, 2021, the following
ICD-10-PCS codes could be used to uniquely describe procedures
involving the use of BREYANZI[supreg]: XW033N7 (Transfusion of
lisocabtagene maraleucel immunotherapy into peripheral vein) or XW043N7
(Transfusion of lisocabtagene maraleucel immunotherapy into central
vein). The applicant provided the following list of codes may be used
to currently identify the R/R SLL/CLL indication for BREYANZI[supreg]
under the ICD-10-CM coding system:
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
C83.00....................... Small cell B-cell lymphoma, unspecified
site.
C83.01....................... Small cell B-cell lymphoma, lymph nodes
of head, face, and neck.
C83.02....................... Small cell B-cell lymphoma, intrathoracic
lymph nodes.
C83.03....................... Small cell B-cell lymphoma, intra-
abdominal lymph nodes.
C83.04....................... Small cell B-cell lymphoma, lymph nodes
of axilla and upper limb.
C83.05....................... Small cell B-cell lymphoma, lymph nodes
of inguinal region and lower limb.
C83.06....................... Small cell B-cell lymphoma, intrapelvic
lymph nodes.
C83.07....................... Small cell B-cell lymphoma, spleen.
C83.08....................... Small cell B-cell lymphoma, lymph nodes
of multiple sites.
C83.09....................... Small cell B-cell lymphoma, extranodal
and solid organ sites.
C91.10....................... Chronic lymphocytic leukemia of B-cell
type not having achieved remission.
C91.12....................... Chronic lymphocytic leukemia of B-cell
type in relapse.
------------------------------------------------------------------------
We are inviting public comments on the use of these ICD-10-CM
diagnosis codes to identify the indication of R/R SLL or CLL for
purposes of the new technology add-on payment, if approved.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that BREYANZI[supreg] is not substantially similar to other
currently available technologies because BREYANZI[supreg] does not use
the same or similar mechanism of action as other therapies approved for
the treatment of R/R CLL/SLL, is not assigned to the same MS-DRG as
other therapies currently approved for the treatment of R/R CLL/SLL,
and does not involve treatment of the same or similar type of disease
and patient population as other CAR T-cell therapies, and that
therefore, the technology meets the newness criterion. The following
table summarizes the applicant's assertions regarding the substantial
similarity criteria. Please see the online application posting for
BREYANZI[supreg] for the applicant's complete statements in support of
its assertion that BREYANZI[supreg] is not substantially similar to
other currently available technologies.
[[Page 18101]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... BREYANZI[supreg] is the first CAR T-cell therapy indicated for the
action to achieve a therapeutic outcome? treatment of R/R CLL/SLL. This mechanism of action is not similar
to any existing technology indicated for the treatment of R/R CLL/
SLL. Existing therapies include BTKis and BCL2is either alone or
in combination with CD20 monoclonal antibodies. These classes of
therapies are typically sequenced with BTKi as the first line of
therapy, then BCL2i as the second line or therapy or vice versa
depending on the preference of the patient and treating physician.
Patients who experience intolerance to or disease progression
after a BTKi and a BCL2i are limited to treatment via recycling of
previous agents (unless refractory), chemoimmunotherapy, non-
covalent BTKi, or phosphatidylinositol 3-kinase inhibitors
(PI3Ki). BTKis, including ibrutinib, acalabrutinib, zanubrutinib,
pirtobrutinib, work by inhibiting the B-cell receptor signaling
pathway through the Bruton Tyrosine Kinase protein. BCL2is,
including venetoclax, work by binding to the BCL2 protein in the
mitochondria leading to apoptosis sensitization. Used in
combination with CD20 monoclonal antibodies, such as rituximab,
obinutuzumab, the two drugs synergize to induce direct induction
of apoptosis, antibody-dependent cell-mediated cytotoxicity and
complement-dependent lysis. Chemoimmunotherapy works through a
variety of mechanisms that disrupt cellular replication leading to
cell death. PI3Kis (idelalisb, duvelisib) work through the
inhibition of the PI3K signaling pathway which regulates multiple
downstream cellular pathways and is often associated with the
development of malignancies. In contrast, BREYANZI[supreg] is a
CAR T-cell therapy. A CAR is an artificial construct introduced
into the DNA of a patient's T cells. The patient's T cells will
then transcribe and translate this DNA into a protein, which
resides at the surface of the T cell, with the extracellular/
targeting domain on the outside of the cell and the costimulatory
and signaling domains, required for T-cell activation, on the
inside of the cell. When the targeting domain binds to its target.
CD19 in the case of BREYANZI[supreg], a signal is transmitted from
the activation and costimulatory domain, that initiates
proliferation of the T cell and secrete compounds that direct the
immune system to kill the cell that is expressing the target. CAR
binding to CD19 expressed in CLL/SLL cells induces activation and
proliferation of CAR T cells, release of pro-inflammatory
cytokines, and cytotoxic killing of target cells. No other therapy
indicated for the treatment of R/R CLL/SLL has this mechanism of
action.
Is the technology assigned to the same MS-DRG as existing No..................... ICD-10-PCS codes XW033N7 (Transfusion of lisocabtagene maraleucel
technologies? immunotherapy into peripheral vein) and XW043N7 (Transfusion of
lisocabtagene maraleucel immunotherapy into central vein) are
assigned to MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-cell and
Other Immunotherapies). No other therapies indicated for the
treatment of patients with R/R CLL/SLL are assigned to MS-DRG 018.
Thus, BREYANZI[supreg] is anticipated to be the only technology
indicated for R/R CLL/SLL assigned to MS-DRG 018.
Does new use of the technology involve the treatment of No..................... BREYANZI[supreg] is the first CAR T-cell therapy approved for the
the same/similar type of disease and the same/similar treatment of R/R CLL/SLL. Other approved CAR T-cell therapies
patient population when compared to an existing treat other myelomas or lymphomas but are not sufficiently
technology? analogous to R/R CLL/SLL to be considered the same or a similar
disease or patient population, as described below. Because
BREYANZI[supreg] is the first CAR T-cell therapy, regardless of
target, indicated for the treatment of R/R CLL/SLL, it does not
involve treatment of the same or similar type of disease and
patient population when compared to existing CAR T-cell therapies.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We note that the applicant asserted that because BREYANZI[supreg]
is the first CAR T-cell therapy, regardless of target, indicated for
the treatment of R/R CLL/SLL, it does not involve treatment of the same
or similar type of disease and patient population as existing
technologies. However, there are other existing (non-CAR T-cell)
treatments for patients with R/R CLL/SLL who have received two or more
prior LOTs including a BTKi and a BCL2i, such as noncovalent BTKis,
PI3Kis, or allogeneic HSCT, and therefore, we question whether
BREYANZI[supreg] treats a different type of disease or patient
population than existing technologies.
We are inviting public comments on whether BREYANZI[supreg] is
substantially similar to existing technologies and whether
BREYANZI[supreg] meets the newness criterion.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that BREYANZI[supreg] meets the cost criterion.
The analysis followed the order of operations summarized in the
following table.
BREYANZI[supreg] Cost Analysis
------------------------------------------------------------------------
------------------------------------------------------------------------
Inclusion/exclusion criteria. For the Inclusion/Exclusion criteria used
in the Cost Analysis, including the data
source and lists of ICD-10-CM codes and
MS-DRGs used by the applicant, see the
cost criterion codes and MS-DRGs
attachment included in the online
posting for BREYANZI[supreg].
Claims identified............ 550 claims mapping to 11 MS-DRGs, with
30.00% of claims mapping to MS-DRG 840
(Lymphoma and Non-Acute Leukemia with
MCC).
[[Page 18102]]
Charges removed for prior Per the applicant, it is possible that
technology. BREYANZI[supreg] could replace other
drug therapies during some patients'
inpatient stays. The applicant removed
100% of drug charges from the identified
cases, as it is difficult to identify
the exact differences in drug regimens
BREYANZI[supreg] patients would receive,
both before and in conjunction with
administration of BREYANZI[supreg]. The
applicant stated this removal likely
over-estimates charges for drugs that
would be replaced by BREYANZI[supreg],
as patients may receive some ancillary
drug treatments in conjunction with
their BREYANZI[supreg] administration.
The applicant did not remove indirect
charges related to prior therapies.
Standardized charges......... The applicant used the standardization
formula provided in Appendix A of the
application. The applicant used all
relevant values reported in the impact
file posted with the FY 2025 IPPS/LTCH
PPS final rule.
Inflation factor............. The applicant applied an inflation factor
of 12.87% to the standardized charges,
based on the inflation factor used to
calculate outlier threshold charges in
the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new The applicant added charges for the new
technology. technology by dividing the cost of the
new technology by the national average
cost-to-charge ratio of 0.178 for Drugs
and Cellular Therapies from the FY 2025
IPPS/LTCH PPS final rule. The applicant
did not add indirect charges related to
the new technology.
Cost analysis results........ Average case-weighted threshold amount:
$1,554,026.
Final inflated average case-weighted
standardized charge per case:
$2,759,094.
------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
all scenarios, the applicant asserted that BREYANZI[supreg] meets the
cost criterion.
We are inviting public comments on whether BREYANZI[supreg] meets
the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that BREYANZI[supreg] demonstrates a substantial
clinical improvement because R/R CLL/SLL patients who have received a
prior BTKi and BCL2i have limited treatment options and outcomes are
extremely poor. The applicant also asserted that BREYANZI[supreg] is
the first and only CAR T-cell therapy indicated for this population,
and in clinical studies, 20 percent of patients treated with
BREYANZI[supreg] achieved complete response or remission (CR) and
remained in CR through 22.4 months of follow-up. The applicant provided
one article and two conference presentations regarding one clinical
trial, and the BREYANZI[supreg] package insert to support these claims,
as well as 11 background articles about CLL, SLL, and current treatment
options.\39\ The following table summarizes the applicant's assertions
regarding the substantial clinical improvement criterion. Please see
the online posting for BREYANZI[supreg] for the applicant's complete
statements regarding the substantial clinical improvement criterion and
the supporting evidence provided.
---------------------------------------------------------------------------
\39\ Background articles are not included in the following table
but can be accessed via the online posting for the technology.
------------------------------------------------------------------------
Supporting evidence provided by the
Applicant statements in support applicant
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a
treatment option for a patient population unresponsive to, or ineligible
for, currently available treatments
------------------------------------------------------------------------
BREYANZI[supreg] is the first and BREYANZI[supreg] (lisocabtagene
only CAR T-cell therapy maraleucel) Prescribing
specifically approved for the Information. 2024.
treatment of R/R CLL and SLL Siddiqi, T., Maloney, D.G.,
patients who have received a Kenderian, S.S., Brander, D.M.,
prior covalent BTKi and BCL2i. Dorritie, K., Soumerai, J.,
Riedell, P.A., Shah, N.N., Nath,
R., Fakhri, B., Stephens, D.M., Ma,
S., Feldman, T., Solomon, S.R.,
Schuster, S.J., Perna, S.K.,
Tuazon, S.A., Ou, S.S., Papp, E.,
Peiser. L., Chen, Y., & Wierda,
W.G. (2023a, August 19).
Lisocabtagene maraleucel in chronic
lymphocytic leukaemia and small
lymphocytic lymphoma (TRANSCEND CLL
004): a multicentre, open-label,
single-arm, phase 1-2 study. The
Lancet, 402(10402), 641-654. https://doi.org/10.1016/S0140-6736 6736(23)01052-8.
The applicant also provided
background information to support
this claim, which can be accessed
via the online posting for the
technology.
R/R CLL and SLL patients who The applicant provided background
received a prior BTKi and BCL2i information to support this claim,
have limited treatment options. which can be accessed via the
online posting for the technology.
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology
significantly improves clinical outcomes relative to services or
technologies previously available
------------------------------------------------------------------------
R/R CLL/SLL patients who have The applicant provided background
received a prior BTKi and BCL2i information to support this claim,
experience poor outcomes on which can be accessed via the
existing therapy. online posting for the technology.
BREYANZI[supreg] is anticipated to BREYANZI[supreg] (lisocabtagene
significantly improve clinical maraleucel) Prescribing
outcomes in R/R CLL/SLL patients Information. 2024.
who have received prior BTKi and Siddiqi, 2023a, op. cit.
BCL2i therapy. Siddiqi T, Maloney DG, Kenderian SS,
et al. Lisocabtagene Maraleucel in
Relapsed or Refractory Chronic
Lymphocytic Leukemia/Small
Lymphocytic Lymphoma: 24-Month
Median Follow-up of TRANSCEND CLL
004. Abstract presented at: 2023
ASH Annual Meeting; December 9-12,
2023b; San Diego, CA.
Siddiqi T, Gauthier J, Kenderian SS,
et al. Lisocabtagene Maraleucel
(liso-cel) in Patients (pts) with
Relapsed or Refractory (R/R)
Chronic Lymphocytic Leukemia (CLL)/
Small Lymphocytic Lymphoma (SLL):
Updated Follow-up of Transcend CLL
004. Abstract presented at: 2024
ASH Annual Meeting; December 7-10,
2024; San Diego, CA.
------------------------------------------------------------------------
[[Page 18103]]
We also received a public comment in response to the New Technology
Town Hall meeting notice published in the Federal Register regarding
the substantial clinical improvement criterion for BREYANZI[supreg],
which we are summarizing in this section.
Comment: The applicant submitted a public comment in response to
questions posed at the Town Hall meeting. With regard to a question
asking about the discrepancy in the number of patients in the full
efficacy set of the TRANSCEND CLL 004 trial in The Lancet article
(Siddiqi et al., 2023a) versus the American Society of Hematology (ASH)
conference slides (Siddiqi et al., 2023b), the applicant stated that,
in the Siddiqi et al. article (2023a), the conforming status of CAR T-
cell product for one patient was unavailable at data cutoff (September
29, 2022); therefore, the product for this patient was considered non-
conforming, and the patient was excluded in the efficacy and safety
analyses that required the receipt of conforming product. The applicant
further explained that after data cutoff, the patient received
conforming product, and thus, the ASH conference slides (Siddiqi et
al., 2023b) included this patient in its safety and efficacy analyses.
With regard to a question asking the applicant to speak to the
issue of CR and how the applicant thinks about CR with minimal residual
disease (MRD) versus nodal response, the applicant stated that the
TRANSCEND CLL 004 study in the Siddiqi et al., article (2023a) assessed
participant responses using the 2018 International Workshop on Chronic
Lymphocytic Leukemia (iwCLL) criteria, which are the regulatory
standard and based on nodal response and hematopoietic recovery and do
not include MRD. The applicant further explained that with CLL,
patients may have bulky lymph nodes, where with treatment, these
patients may see resolution of nodal burden, but it may not resolve to
<1.5 cm, which would qualify as a partial response (PR), and not CR per
the 2018 iwCLL criteria. The applicant stated that there may be no
evidence of residual disease based on blood or bone marrow measures in
these patients.
With regard to a question inquiring how efficacy (overall response
rate (ORR) and progression-free survival (PFS)) with BREYANZI[supreg]
compares to other existing therapies (such as Jaypirca[supreg]
(pirtobrutinib)), and how the applicant considered treatment-emergent
adverse events (TEAEs) for BREYANZI[supreg] versus other treatments for
CLL/SLL, the applicant stated that there is limited real-world data
using other agents in the post-BTKi and -BCL2i treatment setting. Per
the applicant, these limited data suggest poor outcomes, details of
which are included in the BREYANZI[supreg] application for new
technology add-on payments. The applicant referred to the Siddiqi
(2024) presentation slides, which discussed the effects of BREYANZI on
the outcomes of all the TRANSCEND CLL 004 subjects (full population)
and a subset of those with progression on a previously BTKi and
venetoclax failure (referred to as the primary efficacy analysis set,
or PEAS, in the rest of this review). According to the applicant,
Siddiqi et al. (2024) reported the IRC-assessed CR rate of 20 percent
and ORR of 48 percent for the full population treated with
BREYANZI[supreg] at DL2, and the IRC-assessed CR of 20 percent and ORR
of 44 percent for patients in the PEAS cohort. The applicant also noted
that the Siddiqi (2024) presentation slides reported the median PFS
(mPFS) of 18 months for the full population and 11.9 months for the
PEAS cohort. The applicant stated that of the patients who achieved CR
or incomplete count recovery (CRi), the mPFS was not reached (NR) for
both the full population and the PEAS population. The applicant noted
that this efficacy was a result of a single-dose, one-time infusion of
BREYANZI[supreg], rather than a continuous treatment, and that this
resulted in favorable long-term outcomes. Regarding toxicities, the
applicant stated that cytokine response syndrome (CRS) and neurological
adverse events are unique to cellular therapies and were overall well-
managed in the TRANSCEND CLL 004 study (Siddiqi et al., 2023a), as
previously described. The applicant added that no new safety signals
were observed in CLL patients. Per the applicant, other common
toxicities with cellular therapy include hematologic toxicities, which
are also inherent with other targeted agents and were managed with
supportive care.
According to the applicant, Jaypirca[supreg] (pirtobrutinib), a
non-covalent BTKi, is the other FDA-approved agent for patients with
CLL/SLL who have received two or more prior LOTs, including a BTKi and
BCL2i. Per the applicant, in the phase I-II Jaypirca[supreg] trial, the
IRC-assessed ORR was reported as 70 percent, the CR rate reported as 0
percent, and the mPFS reported as 16.8 months.\40\ According to the
applicant, the trial reported any grade adverse events including
fatigue (31.5 percent), bleeding (42.6 percent), infections (71.0
percent), and neutropenia (32.5 percent), which are characteristic of
this type of targeted agent.
---------------------------------------------------------------------------
\40\ Mato, A.R., Woyach, J.A., Brown, J.R., Ghia, P., Patel, K.,
Eyre, T.A., Munir, T., Lech-Maranda, E., Lamanna, N., Tam, C.S.,
Shah, N.N., Coombs, C.C., Ujjani, C.S., Fakhri, B., Cheah, C.Y.,
Patel, M.R., Alencar, A.J., Cohen, J.B., Gerson, J.N., Flinn, I.W.,
Ma, S., Jagadeesh, D., Rhodes, J.M., Hernandez-Ilizaliturri, F.,
Zinzani, P.L., Seymour, J.F., Balbas, M., Nair, B., Abada, P., Wang,
C., Ruppert, A.S., Wang, D., Tsai, D.E., Wierda, W.G., & Jurczak, W.
(2023b, July 6). Pirtobrutinib after a Covalent BTK Inhibitor in
Chronic Lymphocytic Leukemia. New England Journal of Medicine,
389(1), 33-44. https://doi.org/10.1056/NEJMoa2300696.
---------------------------------------------------------------------------
With regard to a question about the breakdown between rates of CR
and CRi in the TRANSCEND CLL 004 study (Siddiqi et al., 2023a), the
applicant stated that the study's primary analysis, which had a data
cutoff of September 29, 2022, reported that the CR rate was 18.4
percent (in 9 of 49 patients) and that among the nine patients who
achieved CR/CRi, eight were in CR and one was in CRi.
The applicant also reiterated that patients with R/R CLL/SLL who
have failed prior BTKi and BCL2i treatment experience poor outcomes on
existing therapy, and BREYANZI[supreg] substantially improved clinical
outcomes for these patients. The applicant added that
BREYANZI[supreg]'s outcomes were even more significant when considering
the established safety profile and the fact that it is a one-time
infusion treatment rather than continuous treatment.
Response: We thank the applicant for its comments. After review of
the information provided by the applicant and the public comment
received in response to the New Technology Town Hall meeting, we have
the following concerns regarding whether BREYANZI[supreg] meets the
substantial clinical improvement criterion. First, we question whether
there is a particular subpopulation for which BREYANZI[supreg] offers a
treatment option that is unresponsive to or ineligible for other
existing therapies. While the applicant asserted that BREYANZI[supreg]
is the first and only CAR T-cell therapy for this indication, it also
stated that there are other treatment options for this patient
population, including non-covalent BTKis, such as Jaypirca[supreg], and
PI3Ks, such as COPIKTRA[supreg].\41\ We note that being the first CAR
T-cell therapy for a particular indication relates to mechanism of
action and is not relevant to the demonstration of substantial clinical
improvement.
---------------------------------------------------------------------------
\41\ National Comprehensive Cancer Network. (2024, October 1).
NCCN Clinical Practice Guidelines in Oncology (NCCN
Guidelines[supreg]): Chronic Lymphocytic Leukemia/Small Lymphocytic
Lymphoma. https://www.nccn.org/professionals/physician_gls/pdf/cll.pdf.
---------------------------------------------------------------------------
[[Page 18104]]
Secondly, while the applicant stated that BREYANZI[supreg] is
anticipated to significantly improve clinical outcomes in R/R CLL/SLL
patients who have received prior BTKi and BCL2i therapy, we have
questions regarding the evidence provided in support of this claim. The
applicant provided several studies based on the results of the
TRANSCEND CLL 004 trial, including one published article (Siddiqi et
al., 2023a), two conference presentations (Siddiqi et al., 2023b;
Siddiqi et al., 2024), and the BREYANZI[supreg] package insert (2024).
We note that the TRANSCEND CLL 004 trial was a single-arm study in
which no historical controls were used to compare the effects of
BREYANZI[supreg] on clinical outcomes. We also note that the applicant
acknowledged the caveats inherent with direct cross-study comparisons
due to differences between patient populations, baseline comorbidities,
and the number and type of prior treatment regimens that subjects have
received. In addition, the applicant stated that no head-to-head
studies exist comparing BREYANZI[supreg] in CLL to currently available
treatments. At the same time, the applicant asserted that
BREYANZI[supreg]'s median time to next therapy was considerably longer
than that observed in a real-world study of patients with CLL/SLL after
prior treatment with a BTKi and B-cell lymphoma 2 inhibitors (6.6
months [95 percent CI, 3.6-10.a].\42\ Also, the applicant noted that
patients with prior BTKi exposure who were venetoclax-na[iuml]ve would
have improved outcomes had they received BREYANZI[supreg] earlier,
before other early-line treatments.\43\ We are concerned about the
validity of comparing the clinical outcomes of BREYANZI[supreg] and
existing therapies to the extent those clinical outcomes were results
of trials with different designs, and the patients in those studies
were selected based on different inclusion/exclusion criteria and may
have different baseline clinical characteristics. These differences may
have an impact on clinical outcomes that was independent of
BREYANZI[supreg] or the comparator treatments. Moreover, we note the
differing results between BREYANZI[supreg] and other existing therapies
in terms of the clinical outcomes cited by the applicant. For example,
as previously described, BREYANZI[supreg] demonstrated a CR rate of 20
percent and ORR of 44 percent for patients in the PEAS cohort.
According to the applicant, in a trial in which patients with R/R CLL/
SLL received Jaypirca[supreg], the CR rate and ORR was 0 percent and 70
percent respectively.\44\ Furthermore, according to the applicant,
BREYANZI[supreg] resulted in PFS of 11.9 months for patients in the
PEAS cohort in the TRASNCEND CLL 004 trial. However, we note that in
the trial in which patients with R/R CLL/SLL received Jaypirca[supreg],
the PFS was 16.8 months.\45\ We question how these mixed findings
support the claim that BREYANZI[supreg] represents a substantial
clinical improvement, given the higher values with respect to the
existing therapies for particular outcome results.
---------------------------------------------------------------------------
\42\ Siddiqi (2023b), op.cit.
\43\ Siddiqi (2024), op.cit.
\44\ Mato (2023b), op.cit.
\45\ Mato (2023b), op.cit.
---------------------------------------------------------------------------
In addition, with respect to the applicant's claims that R/R CLL/
SLL patients who received prior BTKi and BCL2i therapies have limited
treatment options, and that patients with R/R CLL/SLL have poor
outcomes on existing therapy, we question whether these claims support
that BREYANZI[supreg] improves clinical outcomes for this patient
population.
We are inviting public comments on whether BREYANZI[supreg] meets
the substantial clinical improvement criterion.
d. COBENFYTM (Xanomeline and Trospium Chloride)
Bristol Myers Squibb submitted an application for new technology
add-on payments for COBENFYTM for FY 2026. According to the
applicant, COBENFYTM is an oral combination drug consisting
of xanomeline, a muscarinic agonist, and trospium chloride, a
muscarinic antagonist, that is indicated for the treatment of
schizophrenia in adults. Please refer to the online application posting
for COBENFYTM, available at https://mearis.cms.gov/public/publications/ntap/NTP241007U99FM, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
COBENFYTM was granted NDA approval from FDA on September 26,
2024, for the treatment of schizophrenia in adults. The applicant
stated that COBENFYTM became commercially available on
October 9, 2024, and stated the delay in availability was due to a
ramp-up period associated with distribution. We are interested in
additional information regarding the cause of any delay in the
technology's commercial availability, such as additional information
about the ramp-up period for distribution.
COBENFYTM has 3 approved dose strengths (50 mg/20 mg,
100 mg/20 mg, and 125 mg/30 mg) in capsule form. The recommended
starting dosage is one 50 mg/20 mg capsule orally twice daily for at
least 2 days. The dosage is increased to one 100 mg/20 mg capsule
orally twice daily for at least 5 days and may be increased thereafter
to one 125 mg/30 mg capsule orally twice daily based on patient
tolerability and response. The applicant stated the per day treatment
cost is the same across all dosages and the average length of stay for
patients taking COBENFYTM is 7.5 days.
According to the applicant, there are currently no ICD-10-PCS
procedure codes to distinctly identify COBENFYTM. We note
that the applicant submitted a request for approval for a unique ICD-
10-PCS procedure code for COBENFYTM beginning in FY 2026.
The applicant provided the following list of diagnosis codes that may
be used to currently identify the indication for COBENFYTM
under the ICD-10-CM coding system: F20.0 (Paranoid schizophrenia),
F20.1 (Disorganized schizophrenia), F20.3 (Undifferentiated
schizophrenia), F20.89 (Other schizophrenia), F20.9 (Schizophrenia,
unspecified), F25.0 (Schizoaffective disorder, bipolar type), F25.1
(Schizoaffective disorder, depressive type), F25.8 (Other
schizoaffective disorders), and F25.9 (Schizoaffective disorder,
unspecified).
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that COBENFYTM is not substantially similar to
other currently available technologies because it is the first
treatment for schizophrenia to target muscarinic receptors instead of
dopamine. Per the applicant, COBENFYTM combines xanomeline,
a muscarinic agonist, and trospium chloride, a muscarinic antagonist,
which work together to stimulate muscarinic receptors in the brain
while minimizing peripheral side effects; and its efficacy, safety, and
tolerability have been established in acute and long-term trials
providing a new option for patients; and therefore, the technology
meets the newness criterion. The following table summarizes the
applicant's assertions regarding the substantial similarity criteria.
Please see the online application posting for COBENFYTM for
the applicant's complete statements in support of its assertion that
COBENFYTM is not
[[Page 18105]]
substantially similar to other currently available technologies.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... COBENFY\TM\ targets muscarinic receptors as opposed to dopamine
action to achieve a therapeutic outcome? receptors, which has long been the standard of care. This novel
mechanism marks a significant breakthrough in schizophrenia
treatment. COBENFY\TM\ is a combination of xanomeline, a
muscarinic agonist, and trospium chloride, a muscarinic
antagonist, indicated for the treatment of schizophrenia in
adults. Per the FDA label, the efficacy of COBENFY\TM\ is thought
to be due to xanomeline's agonist activity at M1 and M4 muscarinic
acetylcholine receptors in the central nervous system. Meanwhile,
trospium chloride antagonizes the muscarinic receptors primarily
in the peripheral tissues and does not measurably cross the blood
brain barrier. In contrast, typical and atypical antipsychotics
antagonize the dopamine receptors as pure antagonists or partial
agonists and antagonists. With its unique mechanism of action,
COBENFY\TM\ represents the first treatment in a distinct class of
drugs for schizophrenia.
Is the technology assigned to the same MS-DRG as existing Yes.................... The use of COBENFY\TM\ should not impact the MS-DRG assignment and
technologies? COBENFY\TM\ should be assigned to the same MS-DRG as existing
products.
Does new use of the technology involve the treatment of Yes.................... While COBENFY\TM\ treats the same condition, schizophrenia in
the same/similar type of disease and the same/similar adults, as other available technologies, COBENFY\TM\ stands apart
patient population when compared to an existing due to the distinct patient population that could benefit from it.
technology? While the current standard of care can be effective in managing
symptoms of schizophrenia, studies have shown that approximately
40% of people with schizophrenia do not respond to therapy, and up
to 60% experience a partial or inadequate improvement or
intolerable side effects during therapy. Side effects from
existing antipsychotics can include sedation, vision impairments,
seizures, neuroleptic malignant syndrome, and motor disturbances,
such as tremors and rigidity. Similarly, atypical antipsychotics
are associated with significant weight gain, hyperlipidemia,
insulin resistance/diabetes, heart-rate corrected QT interval
(QTc) prolongation, extrapyramidal symptoms, tardive dyskinesia,
and sexual dysfunction due to prolactin elevation. Breaking this
cycle of trial and error is critical and highlights the urgent
need for new treatment options. COBENFY\TM\'s unique mechanism of
action and clinical profile provide a new therapeutic option for
patients, many of whom have not responded to prior treatments. Its
efficacy, safety, and tolerability have been demonstrated across
both acute and long-term studies. In all placebo-controlled
clinical trials, COBENFY\TM\ demonstrated statistically
significant reductions in schizophrenia symptoms compared to
placebo as measured by the Positive and Negative Syndrome Scale
(PANSS) total score, the primary endpoint in the trial. While
common adverse reactions of COBENFY\TM\ included nausea and
dyspepsia, more severe gastrointestinal issues were rare.
Additionally, COBENFY\TM\ does not have atypical antipsychotic
class warnings and precautions and does not have a boxed warning.
COBENFY\TM\'s favorable side effect profile, coupled with its
efficacy, positions it as a valuable alternative for patients,
including those who are unable or unwilling to take typical or
atypical antipsychotics due to adverse events.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We are inviting public comments on whether COBENFYTM is
substantially similar to existing technologies and whether
COBENFYTM meets the newness criterion.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that COBENFYTM meets the cost
criterion. The analysis followed the order of operations summarized in
the following table.
COBENFY\TM\ Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes and MS-DRGs
used by the applicant, see the cost criterion codes and MS-DRGs
attachment included in the online posting for COBENFY\TM\.
Claims identified...................... 24,817 claims mapping to 9 MS-DRGs, with 93.45% of claims mapping to MS-
DRG 885 (Psychoses).
Charges removed for prior technology... The applicant did not remove direct or indirect charges related to the
prior technology. Per the applicant, patients admitted to the hospital
for schizophrenia treatment need to be stabilized. The applicant
anticipated that patients will continue to receive their traditional
treatments to maintain consistent care and that COBENFY\TM\ will be an
additive treatment during a switching period where prescribers
transition from traditional treatments to COBENFY\TM\ as a
monotherapy.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2025 IPPS/LTCH PPS final rule.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the
average cost of the new technology per inpatient stay (treatment cost
per day multiplied by an average 7.5 days per inpatient stay) by the
national average cost-to-charge ratio of 0.178 for Drugs and Cellular
Therapies from the FY 2025 IPPS/LTCH PPS final rule. The applicant did
not add indirect charges related to the new technology.
[[Page 18106]]
Cost analysis results.................. Average case-weighted threshold amount: $43,788.
Final inflated average case-weighted standardized charge per case:
$44,511.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant asserted that COBENFYTM meets the cost
criterion.
We are inviting public comments on whether COBENFYTM
meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that COBENFYTM represents a substantial
clinical improvement over existing technologies because it is a first-
in-class muscarinic agonist offering a new approach to treating
schizophrenia by selectively targeting muscarinic receptors in the
brain without targeting dopamine. The applicant further asserted that
COBENFYTM has the potential to improve outcomes by
addressing both positive and negative symptoms, which current drugs
often inadequately manage, and that its unique mechanism reduces the
risk of dopamine-related side effects, such as tardive dyskinesia (TD).
The applicant stated that for these reasons, COBENFYTM
offers a treatment option for adult patients with schizophrenia who are
unresponsive to, or ineligible for, currently available treatments and
significantly improves clinical outcomes relative to existing
treatments. The applicant provided six articles regarding five studies
to support these claims. We also note that two additional articles
(Cornett et al., 2017 and Lieberman et al., 2005) \46\ submitted as
supporting evidence would more appropriately be characterized as
background articles because they do not directly assess the use of
COBENFYTM.47 48 Instead, Cornett, et al. (2017)
is a literature review of medication-induced TD, and Lieberman, et al.
(2005) is a study reviewing the efficacy and side effect profile of
other antipsychotic drugs in chronic schizophrenia. The following table
summarizes the applicant's assertions regarding the substantial
clinical improvement criterion. Please see the online posting for
COBENFYTM for the applicant's complete statements regarding
the substantial clinical improvement criterion and the supporting
evidence provided.
---------------------------------------------------------------------------
\46\ Background articles are not included in the following table
but can be accessed via the online posting for the technology.
\47\ Cornett, E.M., Novitch, M., Kaye, A.D., Kata, V., Kaye,
A.M. Medication-Induced Tardive Dyskinesia: A Review and Update.
Ochsner J. 2017 Summer;17(2):162-174. PMID: 28638290; PMCID:
PMC5472076.
\48\ Lieberman, J.A., Stroup, T.S., McEvoy, J.P., Swartz, M.S.,
Rosenheck, R.A., Perkins, D.O., . . . & Hsiao, J.K. (2005).
Effectiveness of antipsychotic drugs in patients with chronic
schizophrenia. The New England Journal of Medicine, 353(12), 1209-
1223. https://doi.org/10.1056/NEJMoa051688.
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments
----------------------------------------------------------------------------------------------------------------
COBENFY\TM\'s proven efficacy and side Amy Claxton, George Konis, Inder Kaul, Andrew C. Miller, Steven M.
effect profile make it a valuable Paul, Stephen K. Brannan, Ronald Marcus (2024). Long-Term Metabolic
option for patients who respond Outcomes Associated With KarXT (Xanomeline and Trospium): Interim
inadequately to current treatments. Results From Pooled, Long-Term Safety Studies EMERGENT-4 and EMERGENT-
5. Presentation at the 2024 Annual Conference of the Schizophrenia
International Research Society (SIRS), April 3-7, 2024, Florence,
Italy.
Kaul I, Sawchak S, Correll CU, Kakar R, Breier A, Zhu H, Miller AC,
Paul SM, Brannan SK. Efficacy and safety of the muscarinic receptor
agonist KarXT (xanomeline-trospium) in schizophrenia (EMERGENT-2) in
the USA: results from a randomised, double-blind, placebo-controlled,
flexible-dose phase 3 trial. Lancet. 2024a Jan 13;403(10422):160-170.
doi: 10.1016/S0140-6736(23)02190-6. Epub 2023 Dec 14. Erratum in:
Lancet. 2024a Jun 1;403(10442):2380. doi: 10.1016/S0140-6736(24)01041-
9. PMID: 38104575.
Kaul I, Sawchak S, Walling DP, Tamminga CA, Breier A, Zhu H, Miller AC,
Paul SM, Brannan SK. Efficacy and Safety of Xanomeline-Trospium
Chloride in Schizophrenia: A Randomized Clinical Trial. JAMA
Psychiatry. 2024b Aug 1;81(8):749-756. doi: 10.1001/
jamapsychiatry.2024.0785. Erratum in: JAMA Psychiatry. 2024 Aug
1;81(8):846. doi: 10.1001/jamapsychiatry.2024.2002. PMID: 38691387;
PMCID: PMC11063924.
COBENFY\TM\, due to its distinctive Brannan SK, Sawchak S, Miller AC, Lieberman JA, Paul SM, Breier A.
mechanism of action, may be an Muscarinic Cholinergic Receptor Agonist and Peripheral Antagonist for
effective treatment option for Schizophrenia. N Engl J Med. 2021 Feb 25;384(8):717-726. doi: 10.1056/
patients experiencing disruptive NEJMoa2017015. PMID: 33626254; PMCID: PMC7610870.
negative symptoms. Kaul, 2024a, op. cit.
Kaul, 2024b, op. cit.
Weiden PJ, Breier A, Kavanagh S, et al. Antipsychotic efficacy of
xanomeline-trospium: post hoc analysis of Positive and Negative
Syndrome Scale categorical response rates, time course of response,
and symptom domains of response in a phase 2 study. J Clin Psychiatry.
2022;83(3):21m14316.
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
COBENFY\TM\ improves clinical outcomes Scott Vuocolo, William P. Horan, Amy Claxton, Steven D. Targum, Inder
by demonstrating a long-term reduction Kaul, Sharon Sawchak, Andrew C. Miller, Steven M. Paul, Stephen K.
in positive and negative symptoms of Brannan. (2024, May). Efficacy of KarXT on Negative Symptoms in Acute
schizophrenia and a persistently well- Schizophrenia: An Analysis of Pooled Data From 3 Trials. In Annual
tolerated side-effect profile after a Meeting of the World Congress Collegium Internationale Neuro-
year. Psychopharmacologicum (CINP).
[[Page 18107]]
COBENFY\TM\ offers a side-effect Kaul, 2024a, op. cit.
profile that addresses a significant Kaul, 2024b, op. cit.
gap in antipsychotic treatment and has
the potential to enhance outcomes by
improving tolerability and expanding
treatment options.
COBENFY\TM\ has the potential to Brannan, 2021, op. cit.
improve clinical outcomes due to its Kaul, 2024a, op. cit.
demonstrated efficacy in addressing Kaul, 2024b, op. cit.
both negative and positive symptoms of Weiden, 2022, op. cit.
schizophrenia.
COBENFY\TM\ demonstrates statistically Brannan, 2021, op. cit.
significant and clinically meaningful Kaul, 2024b, op. cit.
reductions in the severity of illness,
as measured by the Clinical Global
Impressions-Severity scale (CGI-S),
compared to placebo.
----------------------------------------------------------------------------------------------------------------
We also received a public comment in response to the New Technology
Town Hall meeting notice published in the Federal Register regarding
the substantial clinical improvement criterion for
COBENFYTM, which we are summarizing in this section.
Comment: The applicant submitted a public comment in response to
questions posed at the Town Hall meeting and provided additional
information.
With regard to a question asking whether there was a statistically
significant degree of long-term improvement for patients treated with
COBENFYTM compared to placebo, the applicant referenced
EMERGENT-4, a 52-week phase III outpatient, open-label extension
clinical trial included with its application. The applicant stated that
participants in this trial previously completed the treatment period of
either the EMERGENT-2 or EMERGENT-3 trial, two 5-week, double-blind,
placebo-controlled, phase III inpatient clinical trials and regardless
of which treatment patients received in the EMERGENT-2 or EMERGENT-3
trial, all patients received COBENFYTM after week 5 during
the open-label extension period (EMERGENT-4). The applicant noted that
the EMERGENT-4 trial found that long-term treatment with
COBENFYTM was associated with improvements in schizophrenia
symptoms, regardless of participants' initial group during EMERGENT-2
and EMERGENT-3, and improvements were maintained throughout the study
period. The applicant stated that, therefore, it expected no
differences in symptom reduction between the two groups during the
EMERGENT-4 study period. The applicant stated that the publication
manuscript is currently in development with planned submission to a
clinical journal in early 2025.
With regard to a request for clarification as to the source of
effect size data referenced during the Town Hall meeting, the applicant
stated there are two large meta-analyses that report effect size ranges
for first-generation (typical) and second-generation (atypical)
antipsychotics, and that in these analyses, the effect size of commonly
used antipsychotics in the U.S. ranges from 0.3 to
0.56.49 50 We note that effect size in these studies refer
to treatments' mean differences, standardized mean differences, or risk
ratios with 95 percent CIs in comparison to placebo.
---------------------------------------------------------------------------
\49\ Leucht, S., Cipriani, A., Spineli, L., Mavridis, D.,
[Ouml]rey, D., Richter, F., Samara, M., Barbui, C., Engel, R.R.,
Geddes, J.R., Kissling, W., Stapf, M.P., L[auml]ssig, B., Salanti,
G., & Davis, J.M. (2013). Comparative efficacy and tolerability of
15 antipsychotic drugs in schizophrenia: a multiple-treatments meta-
analysis. The Lancet, 382(9896), 951-962. https://doi.org/10.1016/s0140-6736(13)60733-3.
\50\ Huhn, M., Nikolakopoulou, A., Schneider-Thoma, J., Krause,
M., Samara, M., Peter, N., Arndt, T., B[auml]ckers, L., Rothe, P.,
Cipriani, A., Davis, J., Salanti, G., & Leucht, S. (2019).
Comparative Efficacy and Tolerability of 32 Oral Antipsychotics for
the Acute Treatment of Adults with multi-episode schizophrenia: a
Systematic Review and Network meta-analysis. The Lancet, 394(10202).
https://doi.org/10.1016/s0140-(19)31135-3.
---------------------------------------------------------------------------
With regard to a question asking for additional information as to
the clinical significance of a 1.0-point improvement in PANSS negative
subscale, the applicant stated it is generally accepted that a mean
reduction of 15 points or greater from baseline on the PANSS total
score, which evaluates positive and negative symptoms of schizophrenia,
is considered clinically meaningful. The applicant also stated that
across EMERGENT-1, EMERGENT-2, and EMERGENT-3 clinical trials, patients
treated with COBENFYTM demonstrated statistically
significant improvements in symptoms compared to placebo, with a mean
PANSS total score reduction of >=15 points from baseline. Further, the
applicant stated that all three trials evaluated the change in PANSS
negative score from baseline as a secondary efficacy endpoint, and
while there is less consensus regarding a clinically meaningful
threshold for the PANSS negative subscale score, COBENFYTM
demonstrated statistically significant PANSS negative subscale score
reductions compared to placebo in the EMERGENT-1 and EMERGENT-2
clinical trials, with a least squares mean difference of -2.3 (p<0.001)
and -1.8 (p=0.0055), respectively. The applicant noted that none of the
three studies enrolled a patient population enriched for negative
symptoms, and currently, there are no FDA-approved medications for the
specific treatment of negative schizophrenia symptoms.
With regard to an inquiry for additional information on long-term
medication adherence in adult patients treated with
COBENFYTM compared to other schizophrenia treatments, the
applicant stated that it will initiate a real-world, prospective,
patient registry study to understand COBENFYTM usage
patterns and COBENFYTM's potential impacts among U.S. adults
with schizophrenia.
Response: We thank the applicant for its comments. After review of
the information provided by the applicant and the public comment
received in response to the New Technology Town Hall meeting, we have
the following concerns regarding whether COBENFYTM meets the
substantial clinical improvement criterion. We note that the applicant
did not identify a patient population for which
[[Page 18108]]
COBENFYTM could be used that is unresponsive to or
ineligible for other available treatments. The applicant asserted that
COBENFYTM's efficacy and side effect profile make it a
valuable option for patients who respond inadequately to current
treatments and that COBENFYTM may be an effective treatment
option for patients experiencing disruptive negative symptoms. To
support these assertions, we note that the applicant provided data on
COBENFYTM from three 5-week, randomized, double-blind trials
(EMERGENT-1, EMERGENT-2, and EMERGENT-3) that compared
COBENFYTM to placebo and from two unpublished 52-week open-
label trials (EMERGENT-4 and EMERGENT-5). While the exclusion criteria
are unknown for EMERGENT-5, we note that the other trials excluded
patients with a history of treatment resistance to schizophrenia
medications, and we therefore question how the trials demonstrate that
COBENFYTM can treat patients unresponsive to other
therapies. In addition, we did not receive data indicating that other
antipsychotics cannot manage negative symptoms. We also note that if a
patient experiences a side effect on one antipsychotic, they may not
experience the same side effect on another antipsychotic. Similarly, if
one antipsychotic does not work for a patient, it does not necessarily
mean another typical or atypical antipsychotic would not work for that
patient. Therefore, we question if COBENFYTM is the only
treatment option for patients with inadequate response to current
treatments or for those experiencing negative symptoms.
The applicant also asserted that COBENFYTM significantly
improves outcomes relative to previously available therapies. To
support this assertion, the applicant provided data from three 5-week
clinical trials (EMERGENT-1, EMERGENT-2, and EMERGENT-3) that compared
COBENFYTM to placebo and a literature review on TD (Cornett
et al., 2017). However, COBENFYTM was compared to placebo in
these trials, and data was not provided comparing COBENFYTM
to currently available therapies. We note that, per the applicant,
there are more than 20 FDA-approved therapies for schizophrenia, and we
are interested in additional information comparing clinical outcomes
with COBENFYTM to these therapies, such as with regard to
reduction in symptoms of schizophrenia and/or side effects, improved
medication adherence, or other outcomes described under the regulations
at Sec. 412.87(b)(1)(ii)(C), to inform an assessment of whether
COBENFYTM provides a substantial clinical improvement over
existing treatment options.
In addition, with respect to the claim that COBENFYTM
offers a side-effect profile that has the potential to enhance outcomes
by improving tolerability and expanding treatment options, the
applicant stated that the provided literature review on TD (Cornett et
al., 2017) supports the theory that blockade of dopamine receptors by
dopamine antagonists contributes to the development of TD, which
COBENFYTM does not affect. We note that the study stated
that typical antipsychotics are the most likely to cause TD while
atypical antipsychotics may be associated with a decreased prevalence
of TD, and we, therefore, are unclear if the applicant is stating that
COBENFYTM may reduce the prevalence of TD only compared to
typical antipsychotics. We also note that this literature review only
discussed TD, which is one potential side effect of some schizophrenia
treatments, and no other provided evidence related to rates of other
potential side effects seen with existing schizophrenia treatment
options such as cardiac arrhythmias, metabolic syndrome, and tremor
were compared to the rates for COBENFYTM. We would
appreciate further information comparing the overall benefit-risk
profile of COBENFYTM to previously available antipsychotics
in order to assess if COBENFYTM provides a substantial
clinical improvement over other available therapies. We also note that
the applicant stated that the EMERGENT trials demonstrated that
COBENFYTM is well-tolerated and that measures of
extrapyramidal symptoms, weight gain, and somnolence were similar
between groups. However, given that the trials were only 5 weeks in
duration and some side effects, such as tardive dyskinesia, can take
longer to occur, we question whether these rates of adverse events may
increase over time. For these reasons, we question the assertion that
COBENFYTM improves tolerability and side-effects relative to
previously available therapies.
The applicant claimed that COBENFYTM demonstrates
statistically significant and clinically meaningful reductions in the
severity of illness compared to placebo, as measured by the Clinical
Global Impression-Severity (CGI-S) scale. According to the applicant,
the CGI-S is a global assessment tool used to rate the overall severity
of a patient's illness, and rather than being specific to positive,
negative, or cognitive symptoms, it instead gives an overall sense of
how severe schizophrenia is perceived to be at a given time. However,
we question long-term efficacy, given that the only data submitted for
this claim was from two 5-week trials (EMERGENT-1 and EMERGENT-3).
We are inviting public comments on whether COBENFYTM
meets the substantial clinical improvement criterion.
e. DuraGraft[supreg] (Vascular Conduit Solution)
Marizyme, Inc. submitted an application for new technology add-on
payments for DuraGraft[supreg] for FY 2026. Per the applicant,
DuraGraft[supreg] is a first-in-class product used during coronary
artery bypass grafting surgery (CABG) in adult patients to protect the
vascular endothelia of harvested vascular grafts during the ischemic
graft storage interval. As noted in the FY 2024 IPPS/LTCH PPS proposed
rule (88 FR 26795), Somahlution, Inc., acquired by Marizyme, Inc. in
2020, submitted and withdrew applications for new technology add-on
payments for DuraGraft[supreg] for FY 2018 and FY 2019. The applicant
also submitted an application for new technology add-on payments for FY
2020 and FY 2024, as summarized in the FY 2020 and FY 2024 IPPS/LTCH
PPS proposed rules (84 FR 19305 through 19312, 88 FR 26795 through
26803), that it withdrew prior to the issuance of the FY 2020 and FY
2024 IPPS/LTCH PPS final rules (84 FR 42194, 88 FR 58804),
respectively. The applicant also submitted an application for new
technology add-on payments for FY 2025, but its application was not
approved in the FY 2025 IPPS/LTCH PPS final rule because we were unable
to determine that DuraGraft[supreg] represents a substantial clinical
improvement over existing therapies (89 FR 69149).
Please refer to the online application posting for
DuraGraft[supreg] available at https://mearis.cms.gov/public/publications/ntap/NTP241007PUDEH, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
DuraGraft[supreg] was granted De Novo classification from FDA on
October 4, 2023, as a solution indicated for adult patients undergoing
CABG and is intended for flushing and storage of the saphenous vein
grafts from harvesting through grafting for up to 4 hours. The
applicant also stated that it received clearance from FDA for a labeled
storage temperature change from refrigerated to controlled room
temperature for DuraGraft[supreg] through a Special 510(k) in May 2024
so that it
[[Page 18109]]
could be stored in the OR. The applicant stated that it chose to launch
the DuraGraft[supreg] product upon this label change, and that
DuraGraft[supreg] will become commercially available on March 31, 2025.
The applicant stated the refrigerated product was not placed on the US
market, nor will it be, as only the controlled room temperature
DuraGraft[supreg] product will be placed on the market. The applicant
further explained that manufacturing with the updated labels could not
begin until new labels were allowed by FDA, ordered from suppliers, and
accepted into the Contract Manufacturing Organization Quality
Management System (CMO QMS), which, per the applicant, is a process
that takes 3 to 4 months. We would appreciate additional information
regarding the cause for any delay in the technology's commercial
availability.
The applicant stated that, effective October 1, 2017, the following
ICD-10-PCS code may be used to uniquely describe procedures involving
the use of DuraGraft[supreg]: XY0VX83 (Extracorporeal introduction of
endothelial damage inhibitor to vein graft, new technology group 3).
The applicant provided a list of diagnosis codes that may be used to
currently identify the indication for DuraGraft[supreg] under the ICD-
10-CM coding system. Please refer to the online application posting for
the complete list of ICD-10-CM codes provided by the applicant.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that DuraGraft[supreg] is not substantially similar to other
currently available technologies because DuraGraft[supreg] is a first-
in-class product for use in adult patients undergoing CABG surgery and
received FDA marketing authorization via a De Novo pathway. The
following table summarizes the applicant's assertions regarding the
substantial similarity criteria. Please see the online application
posting for DuraGraft[supreg] for the applicant's complete statements
in support of its assertion that DuraGraft[supreg] is not substantially
similar to other currently available technologies.
----------------------------------------------------------------------------------------------------------------
Applicant
Substantial similarity criteria response Applicant assertions regarding this criterion
----------------------------------------------------------------------------------------------------------------
Does the technology use the No.............. DuraGraft[supreg] is a first-in-class product and there is no
same or similar mechanism of product that is similar with similar mechanism of action.
action to achieve a Also, the response to FY2025 NTAP application concurred that
therapeutic outcome? DuraGraft met the Newness Criterion and since then there are
still no other technologies or products that have been
introduced into the market that are similar or with similar
mechanism of action.
Is the technology assigned to Yes............. MS-DRGs used during CABG surgery are aligned to the same MS-
the same MS-DRG as existing DRGs for which DuraGraft[supreg] is indicated.
technologies?
Does new use of the technology Yes............. DuraGraft[supreg] is used in the CABG patient population;
involve the treatment of the however, there are no existing products with the same
same/similar type of disease indication as DuraGraft[supreg] nor are there existing
and the same/similar patient products similar to DuraGraft[supreg] used during CABG
population when compared to an surgery.
existing technology?
----------------------------------------------------------------------------------------------------------------
We note that in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69142
through 69143), we agreed that DuraGraft[supreg] has a unique mechanism
of action compared to other vein graft storage solutions because it
creates a reducing environment for vascular grafts to prevent oxidative
damage which occurs during ischemic storage of grafts.
We are inviting public comments on whether DuraGraft[supreg] is
substantially similar to existing technologies and whether
DuraGraft[supreg] meets the newness criterion.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that DuraGraft[supreg] meets the cost
criterion. The analysis followed the order of operations summarized in
the following table.
DuraGraft[supreg] Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes, ICD-10-PCS
codes, and MS-DRGs used by the applicant, see the cost criterion codes
and MS-DRGs attachment included in the online posting for
DuraGraft[supreg].
Claims identified...................... 32,602 claims mapping to 65 MS-DRGs, with none exceeding more than
22.69% of the total identified cases.
Charges removed for prior technology... The applicant removed 100% of blood charges and 25% of the charges
associated with medical/surgical supplies for each case. The applicant
did not remove indirect charges related to the prior technology.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2023 IPPS/LTCH PPS final rule
correcting amendment.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of DuraGraft[supreg] by the national average cost-to-charge ratio of
0.297 for Supplies & Equipment from the FY 2025 IPPS/LTCH PPS final
rule. The applicant did not add indirect charges related to the new
technology.
Cost analysis results.................. Average case-weighted threshold amount: $245,963.
Final inflated average case-weighted standardized charge per case:
$312,912.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant asserted that DuraGraft[supreg] meets the cost criterion.
We are inviting public comments on whether DuraGraft[supreg] meets
the cost criterion.
[[Page 18110]]
With regard to the substantial clinical improvement criterion, the
applicant asserted that DuraGraft[supreg] represents a substantial
clinical improvement over existing technologies because
DuraGraft[supreg] significantly improves clinical outcomes including
reducing long-term adverse events and mortality, improving myocardial
protection and event-free survival, and reducing vein graft wall
thickness compared to other intraoperative vein-graft preservation
solutions. The applicant provided six documents to support these
claims, including five studies and a pre-publication version of one of
the studies, as well as a supplemental attachment providing responses
to CMS's concerns and decision regarding the applicant's FY 2025
application for new technology add-on payments for DuraGraft[supreg],
as discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69147
through 69149). The applicant also provided 44 background articles.\51\
Please see the online posting for DuraGraft[supreg] for the applicant's
complete statements regarding the substantial clinical improvement
criterion and the supporting evidence provided.
---------------------------------------------------------------------------
\51\ Background articles are not included in the following table
but can be accessed via the online posting for the technology.
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
Reduced Long-term Repeat Haime, M, McLean RR, and Kurgansky KE, et al (2018). Relationship
Revascularization. between intra-operative vein graft treatment with DuraGraft[supreg] or
saline and clinical outcomes after coronary artery bypass grafting,
Expert Review of Cardiovascular Therapy, 16:12, 963-970. DOI: 10.1080/
14779072.2018.1532289.
Lopez-Menendez J, Castro-Pinto M, Fajardo E, Miguelena J, Martin M,
Munoz R, Rodriguez-Roda J. Vein graft preservation with anendothelial
damage inhibitor in isolated coronary artery bypass surgery: an
observational propensity score-matched analysis. J Thorac Dis
2023;15(10):5549-5558.
Marizyme, Inc. Substantial Clinical Improvement Discussion.
The applicant provided background information to support this claim,
which can be accessed via the online posting for the technology.
Reduced 12 mo. Overall Mean Wall Perrault, LP, Carrier, M, and Voisine, P, et al (2021). Sequential
Thickness (Whole Graft Analysis). multidetector computed tomography assessments after venous graft
treatment solution in coronary artery bypass grafting. Journal of
Thoracis and Cardiovascular Surgery. Jan. 2021, Vol. 161, Number 1, 96-
106. https://doi.org/10.1016/j.jtcvs.2019.10.115.
Improved Myocardial Protection......... Szalkiewicz, P, Emmert, MY, and Heinisch, PP, et al (2022). Graft
Preservation confers myocardial protection during coronary artery
bypass grafting. Frontiers in Cardiovascular Medicine, July 2022, pp 1-
10. DOI 10.3389/fcvm.2022.922357.
Reduction of long-term major adverse Haime, 2018, op. cit.
cardiovascular events (MACE). Lopez-Menendez, 2023, op. cit.
Reduced Mortality for at Least 3 Years Caliskan E, Misfeld M, Sandner, S, et al. Transatlantic analysis of
post-CABG. patient profiles and mid-term survival after isolated coronary artery
bypass grafting: a head-to-head comparison between the European
DuraGraft Registry and the US STS Registry. Frontiers in
Cardiovascular Medicine, Sept 2024, DOI 10.3389\fcmv.2024.1366460.
Marizyme (2023) Internal Study Report Safety of DuraGraft: A Comparison
to Standard of Care Graft Storage Solutions in Isolated CABG Patients
in the Largest Worldwide CABG Registry 3-Year Follow-up Post-Market
DuraGraft Registry vs. Standard of Care CABG in the STS Database.
Unpublished.
Significantly Better Event-free Lopez-Menendez, 2023, op. cit.
Survival in Diabetic Patients and
Those with Two or More SVGs.
Decreased Rate of Change from 1-12 Perrault, 2021, op. cit.
months for Maximum Graft Narrowing
(Focal Stenosis).
Reduced Long-term Non-fatal myocardial Haime, 2018, op. cit.
infarction (MI).
----------------------------------------------------------------------------------------------------------------
We received a public comment in response to the New Technology Town
Hall meeting notice published in the Federal Register regarding the
substantial clinical improvement criterion for DuraGraft[supreg], which
we summarize in this section.
Comment: The applicant submitted a public comment to address
questions raised at the Town Hall meeting. In response to questions
asking about why DuraGraft[supreg] has an impact at 36-months and about
results observed within 15 minutes post flushing and storage, the
applicant referred to a peer-reviewed journal article by Pachuk et al.
(2019) study, which compared the viability of human saphenous vein
(HSV) segments flushed and submerged in either (a) DuraGraft[supreg]
for one hour or heparinized saline (b) one hour, (c) 15 minutes or (d)
30 minutes and then stained for viability.\52\ The applicant submitted
this article as background information as part of its FYs 2024, 2025,
and 2026 new technology add-on payment applications. Per the applicant,
the data showed that storage in saline resulted in loss of cell
viability within 15 minutes and almost complete loss of viability
following 30 minutes exposure to saline. The applicant noted that in
contrast, viability of HSV segments is maintained following one hour
storage/flushing with DuraGraft[supreg] (and even after several hours),
which means that the vein segments must also have been viable earlier
at 15 and 30 minutes; a time at which vein segments were dying or dead
in saline. Per the applicant, it is therefore concluded that
DuraGraft[supreg] provides a benefit even at 15-30 minutes of storage
and flushing. The applicant also clarified how a single intraoperative
exposure to DuraGraft[supreg]
[[Page 18111]]
can affect clinical outcomes years later. The applicant explained that
DuraGraft[supreg] mitigates oxidative damage during bypass surgery,
thereby reducing ischemia reperfusion injury (IRI) and its long-term
effects.53 54 The applicant noted that IRI, characterized by
oxidative stress and inflammation, leads to vein graft disease (VGD),
which progresses through stages of intimal hyperplasia, stenosis, and
occlusion.55 56 The applicant stated that clinical studies,
which were included in its application and discussed in further detail
later in this section, such as the Perrault et al. (2019) study,
demonstrated that DuraGraft[supreg]-treated veins showed reduced wall
thickening and lumen narrowing at 12 months. Additionally, the
applicant stated that the Haime et al. (2018) study and the Caliskan et
al. (2024) study \57\ indicated improved clinical outcomes and lower
mortality rates in DuraGraft[supreg] patients.
---------------------------------------------------------------------------
\52\ Pachuk, CJ, Rushton-Smith SK, & Emmert MY (2019).
Intraoperative storage of saphenous vein grafts in coronary artery
bypass grafting. Expert review of medical devices, 16(11), 989-997.
https://doi.org/10.1080/17434440.2019.1682996.
\53\ Shuhaiber, J.H., Evans, A.N., Massad, M.G., & Geha, A.S.
(2002). Mechanisms and future directions for prevention of vein
graft failure in coronary bypass surgery. European journal of
cardio-thoracic surgery: official journal of the European
Association for Cardio-thoracic Surgery, 22(3), 387-396. https://doi.org/10.1016/s1010-7940(02)00253-1.
\54\ Osgood, M.J., Hocking, K.M., Voskresensky, I.V., Li, F.D.,
Komalavilas, P., Cheung-Flynn, J., & Brophy, C.M. (2014). Surgical
vein graft preparation promotes cellular dysfunction, oxidative
stress, and intimal hyperplasia in human saphenous vein. Journal of
vascular surgery, 60(1), 202-211. https://doi.org/10.1016/j.jvs.2013.06.004.
\55\ Murphy, G.J., & Angelini, G.D. (2004). Insights into the
pathogenesis of vein graft disease: lessons from intravascular
ultrasound. Cardiovascular ultrasound, 2, 8. https://doi.org/10.1186/1476-7120-2-8.
\56\ Schwartz S.M. (1997). Smooth muscle migration in
atherosclerosis and restenosis. The Journal of clinical
investigation, 100(11 Suppl), S87-S89.
\57\ The EU DuraGraft Registry is an ongoing European post-
market study designed to support an international CABG registry
database used to assess patients receiving DuraGraft[supreg] during
CABG surgery.
---------------------------------------------------------------------------
In response to our request for additional details on the study
highlighting the impact of storage solutions on vein graft failure
rates, based on a sub-analysis of the data from PREVENT IV trial
(ClinicalTrials.gov: NCT00042081),\58\ the applicant explained that the
PREVENT IV study was a large-scale prospective trial aimed at assessing
the safety and efficacy of edifoligide in preventing vein graft failure
(VGF) after CABG by inhibiting neointimal hyperplasia (Alexander et
al., 2005). The applicant noted that the sub-analyses of the study data
revealed that the intraoperative graft storage solution had the most
significant correlation with VGF, with buffered saline solutions like
Plasmalyte, Normasol, or Lactated Ringer reducing failure rates by 28
percent compared to blood and saline.59 60 61 The applicant
stated that, despite this improvement, these solutions do not prevent
ischemic or oxidative damage, as they merely maintain pH balance.\62\
The applicant asserted that, in contrast, DuraGraft[supreg] offers a
unique mechanism by creating a reducing environment to prevent
oxidative damage during ischemic storage, using L-glutathione and L-
Ascorbic acid, which has been associated with reduced graft wall
thickening and a significant three-year mortality benefit, and
therefore, in no way should these liquids be compared to or considered
similar to DuraGraft[supreg].
---------------------------------------------------------------------------
\58\ Alexander, J.H., Hafley, G., Harrington, R.A., Peterson,
E.D., Ferguson, T.B., Lorenz, T.J., Goyal, A., Gibson, M., Mack,
M.J., Gennevois, D., Bowman, S.D., & Jennings, L.K. (2005).
Prevention of autogenous vein graft failure in coronary artery
bypass procedures: Results of a multicenter trial of edifoligide for
the prevention of vein graft failure in coronary artery bypass
grafting (PREVENT IV). The Journal of the American Medical
Association, 294(19), 2446-2454. https://doi.org/10.1001/jama.294.19.2446.
\59\ Harskamp, R.E., Lopes, R.D., Baisden, C.E., de Winter,
R.J., & Alexander, J.H. (2013). Saphenous vein graft failure after
coronary artery bypass surgery: pathophysiology, management, and
future directions. Annals of surgery, 257(5), 824-833. https://doi.org/10.1097/SLA.0b013e318288c38d.
\60\ Murphy, G.J., & Angelini, G.D. (2004). Insights into the
pathogenesis of vein graft disease: lessons from intravascular
ultrasound. Cardiovascular ultrasound, 2, 8. https://doi.org/10.1186/1476-7120-2-8.
\61\ Hess, C.N., Lopes, R.D., Gibson, C.M., Hager, R., Wojdyla,
D.M., Englum, B.R., Mack, M.J., Califf, R.M., Kouchoukos, N.T.,
Peterson, E.D., & Alexander, J.H. (2014). Saphenous vein graft
failure after coronary artery bypass surgery: insights from PREVENT
IV. Circulation, 130(17), 1445-1451. https://doi.org/10.1161/CIRCULATIONAHA.113.008193.
\62\ Hess, 2014, op. cit.
---------------------------------------------------------------------------
Response: We thank the applicant for its comment. After review of
the information provided by the applicant and the public comment
received in response to the new technology add-on payment town hall
meeting, we continue to have concerns regarding whether
DuraGraft[supreg] meets the substantial clinical improvement criterion,
as described in the FY 2025 IPPS/LTCH final rule (89 FR 69144 through
69149). First, with regard to comparison with currently available
treatments, as previously stated in the FY 2025 IPPS/LTCH PPS final
rule (89 FR 69148), we are unclear how improvements demonstrated by use
of DuraGraft[supreg] as compared to saline controls demonstrate
substantial clinical improvement over other existing technologies
without an assessment of comparative outcomes to the other vein graft
preservation solutions. We note that all of the studies provided
compared DuraGraft[supreg] to saline controls and not to other
intraoperative buffered vein graft solutions such as PlasmaLyte,
Normoscol, and Ringer's solution with respect to vein graft patency or
clinical outcomes.\63\ We note that in its response to this concern
from the FY 2025 IPPS/LTCH PPS final rule, the applicant stated that it
tested against saline as it is still the most preferred wetting
solution amidst dozens used as wetting solutions by surgeons in the
United States according to the result of a survey published in
JAMA.\64\ The applicant also stated that DuraGraft[supreg] was tested
against other wetting solutions in preclinical and non-clinical studies
with no difference seen in the results of mechanism compared to when
saline was used as the control.\65\ However, we note that according to
the same survey, among the 100 top-performing medical centers that
conduct CABG, 40 percent reported using pH-buffered solution
(commercially available or homegrown), compared to 28.9 percent
reporting the use of saline, and 25.6 percent autologous blood. In
addition, we are unclear how the lack of differences in the mechanism
in pre-clinical and non-clinical studies relates to a demonstration of
substantial clinical improvement over those therapies in Medicare
patients undergoing CABG. While the applicant stated in its Town Hall
comment that Ringers Lactate, Plasmalyte or Normosol buffered solutions
are only used to keep grafts from drying out between harvesting and
implantation and should not be compared to or considered similar to
DuraGraft[supreg], as we noted in the FY 2025 IPPS/LTCH PPS final rule,
studies have shown that vein graft storage solutions have differing
effects on graft endothelium. We further note that previous studies
have shown that saline alone is acidic and not beneficial for grafts,
and that buffered solutions, such as PlasmaLyte, Normoscol, and
Ringer's solution, are associated with lower VGF rates as compared to
saline.\66\ We note that whether or not these other buffered solutions
are the same or similar to DuraGraft[supreg] does not determine if
their use is part of the standard of care for
[[Page 18112]]
purposes of assessing whether DuraGraft[supreg] represents a
substantial clinical improvement as compared to existing technologies.
We welcome comments on the comparison of DuraGraft[supreg] to saline
alone versus other storage solutions used in contemporary CABG
standards of care in the U.S. As these other solutions are also
existing vein graft storage options, we would appreciate evidence
comparing DuraGraft[supreg] to these currently available standard of
care options to demonstrate post-CABG clinical improvement.
---------------------------------------------------------------------------
\63\ Marizyme (2023) op. cit.
\64\ William SE, Harskamp RE, and Bose S (2015). The
Preservation and Handling of Vein Grafts in Current Surgical
Practice: Findings of a Survey Among Cardiovascular Surgeons of Top-
Ranked US Hospitals [verbar] Surgery [verbar] JAMA Surgery [verbar]
JAMA Network.
\65\ Marizyme (2023), op. cit.
\66\ Harskamp RE, Alexander JH, Schulte PJ, Brophy CM, Mack MJ,
Peterson ED, Williams JB, Gibson CM, Califf RM, Kouchoukos NT,
Harrington RA, Ferguson TB Jr, Lopes RD. Vein Graft Preservation
Solutions, Patency, and Outcomes After Coronary Artery Bypass Graft
Surgery Follow-up From PREVENT IV Randomized Clinical Trial. JAMA
Surg., 2014;149(8):798-805.
---------------------------------------------------------------------------
Second, regarding interim or surrogate endpoints, as in previous
years, the applicant stated that the use of DuraGraft[supreg] leads to
reduced 12 month overall mean wall thickness and a decreased rate of
change from 1 to 12 months (focal stenosis) for maximum graft narrowing
(Perrault et al., 2021), and improved myocardial protection with lower
troponin (hs-Tnl) values from 3 to 6 hours and up to 4 days
(Szalkiewicz et al., 2022). However, as discussed previously in the FY
2025 IPPS/LTCH PPS final rule (89 FR 69148), early anatomical changes
associated with the development of VGD (such as changes in wall
thickness and graft narrowing) are surrogate endpoints, and we
similarly note that that hs-Tnl levels are also surrogate measure for
peri-operative MI, and, therefore, they do not demonstrate a clinical
outcome as described under the regulations at Sec.
412.87(b)(1)(ii)(C).
We also remain concerned about the effects on the evidence provided
of potential confounders that have not been taken into account in the
study designs. We note that SVG failure is the result of a complex
process involving multiple risk factors. Surgical risk factors other
than the use of DuraGraft[supreg] may also contribute to post-CABG
clinical outcomes. Thus, evidence about the effects of
DuraGraft[supreg] on VGF may be confounded by factors related to pre-
operative care (such as aspirin), intra-operative procedures and
techniques (such as no touch harvesting, appropriate length of vein,
vein graft storage, or transit time flow measurement, and post-CABG
care management (such as lipid-lowering therapies and P2Y12
inhibitors). For example, we are concerned about whether the Haime
study (2018) accounted for potential confounding effects of risk
factors such as whether patients received beta-blockers before surgery,
were on ventilation support for more than 12 hours, developed pneumonia
or post-operative atrial fibrillation,\67\ were in pre-operative renal
failure on dialysis or had a lower estimated glomerular filtration
rate,\68\ or the type of post-acute care facility that patients were
referred to,\69\ which may impact post-CABG outcomes. Similarly, we
question whether the results of the Szalkiewicz (2022) study, based on
a single-center study conducted in Austria, and the Lopez-Mendez (2023)
study, based on a single-center study in Spain, could have been
confounded by site-specific factors or by standard of CABG care
specific to those two countries.
---------------------------------------------------------------------------
\67\ Ibrahim KS, Kheirallah KA, Rahman A, et al. Factors
affecting duration of stay in the intensive care unit after coronary
artery bypass surgery and its impact on in-hospital mortality: a
retrospective study. Journal of Cardiothoracic Surgery February
2024. 19(45).
\68\ Chua TK, GAO F, Chia SY, et al. Long-term mortality after
isolated coronary artery bypass grafting and risk factors for
mortality. Journal of Cardiothoracic Surgery July 2024. 19(429).
\69\ Sultana I, Errguntla M, Kum HC, et al. The
interrelationships between the length of stay, readmission, and
post-acute care referral in cardiac surgery patients. Health
Analytics November 2022. Volume 2.
---------------------------------------------------------------------------
We also note that the only new study provided by the applicant in
its application for FY 2026 was the Caliskan et al. (2024) study,\70\
which is the published version of the Marizyme Internal Study Report
(2023) that was also provided in its FY 2025 application. The applicant
stated that this study demonstrates a three-year mortality benefit
associated with the use of DuraGraft[supreg]. Per the applicant, the
Caliskan et al. (2024) study compares patients in the European
DuraGraft Registry (DuraGraft[supreg] cohort) who underwent isolated
CABGs and were exposed to DuraGraft[supreg] between 2016 and 2019 to
randomly selected patients in the U.S. Society of Thoracic Surgeons
(STS) National DatabaseTM (US Cohort) for the same period.
Using a propensity score model (PSM), the authors examined the
mortality rate of 2,400 patients matched from each registry at 30-day,
12-, 24-, and 36-month post CABG. However, we question whether any
results seen may have been affected by potential confounders. According
to Caliskan et al. (2024), more than 95 percent of the U.S. hospitals
performing CABG surgery report data to the STS, which captured almost
all (98 percent) of the CABG surgeries in the U.S. We are interested in
similar information about the European DuraGraft Registry, including
its clinical site-selection standards and patient inclusion and
exclusion criteria. We question whether these factors may have
confounded the relationship between DuraGraft[supreg] and post-CABG
mortality. In addition, we note that due to data availability, intra-
operative risk factors, like the use of Transit Time-Flow
Measurement,\71\ on-pump status, endoscopic harvest, and post-operative
therapies known to minimize SVG failure, were not accounted for in the
Caliskan (2024) study. The use of post-procedural therapies may also
confound the effects of DuraGraft[supreg] on post-CABG outcomes. For
example, SVG failure is up to five times more frequent in patients who
are not treated with aspirin postoperatively, and lipid-lowering
therapies, such as statin therapies, reduce SVG occlusion rates as well
as adverse events after CABG.\72\ Additionally, we note that according
to Lopez-Menendez et al. (2023), every CABG patient in its institution
is discharged home with dual antiplatelet therapy for a duration of
three months, along with high-dose statins and that the study groups
adhered to this institutional protocol, with a 100 percent completion
rate. We question whether post-surgical protocols like this might have
confounded the treatment effects of DuraGraft[supreg] on mortality
rates, especially those after 30-day post CABG. We also question the
Caliskan team's finding (2024) that DuraGraft[supreg] had significant
effects on all-cause mortality rates at 36-month post-CABG but not at
30-day, 12-, or 24-months. Per the applicant, the 36-month all-cause
mortality estimate for the DuraGraft[supreg] cohort was 7.37 percent
[95 percent, CI 6.36 to 8.53], compared to 9.65 percent [95 percent, CI
8.37 to 11.10] for the US cohort (log-rank p-value = 0.016). However,
there was no significant difference in survival between the
DuraGraft[supreg] and U.S. cohorts throughout 2 years post-CABG. We
therefore question whether mortality at 36 months post-CABG may be
associated with risk factors that emerged long after the CABG surgery.
Moreover, we note that in Lopez-Menendez et al. (2023), in which 90
CABG patients whose veins were treated with DuraGraft[supreg] were
matched with another 90 whose veins were treated with saline solution,
the three-year mortality rate of the DuraGraft[supreg] group was not
significantly different from that of the saline group. We welcome
information about the mixed evidence from the Caliskan et al. (2024)
and Lopez-Menendez et al. (2023) studies.
---------------------------------------------------------------------------
\70\ Per the applicant, Caliskan et al. (2024) is based on the
Marizyme internal study report.
\71\ Lopez-Menendez (2023), op. cit.
\72\ Willemsen, L, Janssen, P, Klein, P, Berg, JM, Therapies to
improve vein graft patency after CABG, American College of
Cardiology, February 8, 2021: Therapies to Improve Vein Graft
Patency After CABG--American College of Cardiology.
---------------------------------------------------------------------------
[[Page 18113]]
Furthermore, the Caliskan study used all-cause mortality, rather
than cardiac-related mortality, to represent clinical outcomes
resulting from the use of DuraGraft[supreg], which may include deaths
by other acute or chronic conditions and cannot be attributed to the
quality of CABG-related care, including the use of DuraGraft[supreg].
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69149), we expressed
concern that the Marizyme Internal Study (2023), which has the same
content as Caliskan et al. (2024), only reported all-cause mortality
and does not specify how many patients had mortality due to other
causes that could not be attributed to use of a vein preservation
solution other than DuraGraft[supreg]. We continue to have the concern
that all-cause mortality may include deaths resulting from other
conditions rather than heart diseases. We remain unclear whether
DuraGraft[supreg] was the only factor that contributed to the
differences in all-cause mortality rates between the treatment
(DuraGraft[supreg]) and control groups. We also remain unclear in what
ways the results demonstrated how DuraGraft[supreg] brought about the
reduction in all-cause mortality. While we acknowledge that the use of
all-cause mortality as a clinical outcome may be the result of data
availability, it is unclear that DuraGraft[supreg] was the only
differing factor between the arms, and how this demonstrates that it
was DuraGraft[supreg] that effected this difference in mortality,
rather than some other factor. We welcome information about the choice
of this outcome as an indicator of the effects of DuraGraft[supreg] on
clinical outcome improvement.
We also note regarding the attrition rate for the DuraGraft[supreg]
registry that, according to Caliskan et al. (2019),\73\ patients were
contacted via mail, email, or telephone at one month, one year, and
annually thereafter up to five years post CABG to determine whether
cardiac-related adverse events and/or hospitalizations have occurred.
We are unclear about the number of patients who were lost to follow up,
the reasons for dropping out, and how these reasons were mapped to the
definition of clinical outcomes. We also welcome information about how
attrition impacted the number of patients in the treatment
(DuraGraft[supreg]) and control groups at prespecified points of the
follow-up period.
---------------------------------------------------------------------------
\73\ Caliskan E, Sandner S, and Misfeld M, et al (2019) A novel
endothelial damage inhibitor for the treatment of vascular conduits
in coronary artery bypass grafting: protocol and rationale for the
European, multicentre, prospective, observational DuraGraft
registry. Journal of Cardiothoracic Surgery https://doi.org/10.1186/s13019-019-1010-z.
---------------------------------------------------------------------------
We are inviting public comments on whether DuraGraft[supreg] meets
the substantial clinical improvement criterion.
f. FIBRYGA[supreg] (Fibrinogen (Human))
Octapharma USA, Inc. submitted an application for new technology
add-on payments for FIBRYGA[supreg] for FY 2026. According to the
applicant, FIBRYGA[supreg] is a concentrated form of human fibrinogen,
indicated for fibrinogen supplementation in bleeding patients with
acquired fibrinogen deficiency and the treatment of acute bleeding
episodes in patients with congenital fibrinogen deficiency, including
afibrinogenemia and hypofibrinogenemia. We note that the applicant is
seeking new technology add-on payments for FIBRYGA[supreg] for FY 2026
specific to the 2024 supplemental Biologics License Application (sBLA)
indicated for the fibrinogen supplementation in bleeding adult and
pediatric patients with acquired fibrinogen deficiency.
Please refer to the online application posting for FIBRYGA[supreg],
available at https://mearis.cms.gov/public/publications/ntap/NTP241007YU8UR, for additional detail describing the technology and
acquired fibrinogen deficiency.
With respect to the newness criterion, according to the applicant,
FIBRYGA[supreg] was granted supplemental BLA approval from FDA on July
31, 2024, expanding its previous BLA indication to include the
fibrinogen supplementation in bleeding adult and pediatric patients
with acquired fibrinogen deficiency indication and to update the U.S.
prescribing information to include this indication.\74\ According to
the applicant, FIBRYGA[supreg] became commercially available
immediately after FDA approval for this expanded indicated use. The
applicant stated that FIBRYGA[supreg] is administered intravenously
with a recommended dose of 4g for adults per inpatient stay.
---------------------------------------------------------------------------
\74\ Previous FDA approvals for FIBRYGA[supreg]: In 2017, FDA
granted FIBRYGA[supreg] approval under a BLA application for the
treatment of acute bleeding episodes in adults and adolescents >=12
years of age with congenital fibrinogen deficiency, including
afibrinogenemia and hypofibrinogenemia. On December 23, 2020, FDA
granted FIBRYGA[supreg] approval under a sBLA application for on-
demand treatment of acute bleeding episodes to pediatric patients
<12 years of age with congenital fibrinogen deficiency.
---------------------------------------------------------------------------
According to the applicant, there are currently no ICD-10-PCS
procedure codes to identify FIBRYGA[supreg]. We note that the applicant
submitted a request for approval for a unique ICD-10-PCS procedure code
for FIBRYGA[supreg] beginning in FY 2026. The applicant stated that
D68.4 (Acquired coagulation factor deficiency) and O72.3 (Postpartum
coagulation defects) may be currently used to identify the indication
for FIBRYGA[supreg] under the ICD-10-CM coding system. We believe the
relevant ICD-10-CM code to identify the indication of fibrinogen
supplementation in bleeding adult and pediatric patients with acquired
fibrinogen deficiency that is relevant to this new technology add-on
payment application would be D68.4 (Acquired coagulation factor
deficiency). We are inviting public comments on the use of this ICD-10-
CM diagnosis code to identify this indication for purposes of the new
technology add-on payment, if approved.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that FIBRYGA[supreg] is not substantially similar to other
currently available technologies because it is the only FDA-approved
therapy available to treat acquired fibrinogen deficiency in bleeding
patients. According to the applicant, in patients experiencing a major
bleeding event, acquired fibrinogen deficiency often goes untreated
because cryoprecipitate cannot be delivered fast enough. The applicant
further explained that FIBRYGA[supreg]'s storage and preparation
characteristics allow it to be readily available, giving patients
reliable access to therapy that is potentially lifesaving, and that
therefore, the technology meets the newness criterion. The following
table summarizes the applicant's assertions regarding the substantial
similarity criteria. Please see the online application posting for
FIBRYGA[supreg] for the applicant's complete statements in support of
its assertion that FIBRYGA[supreg] is not substantially similar to
other currently available technologies.
[[Page 18114]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of Yes.................... FIBRYGA[supreg] works by providing a source of fibrinogen the body
action to achieve a therapeutic outcome? can use to form blood clots to stop bleeding. This is the same
mechanism used by cryoprecipitate; however, FIBRYGA[supreg]
provides a faster, safer, and more consistent dosage as compared
to cryoprecipitate.
Is the technology assigned to the same MS-DRG as existing Yes.................... It is not expected that the use of FIBRYGA[supreg] will affect the
technologies? MS-DRG assignment.
Does new use of the technology involve the treatment of No..................... FIBRYGA[supreg] is currently the only FDA-approved therapy for
the same/similar type of disease and the same/similar treating acquired fibrinogen deficiency as a result of major
patient population when compared to an existing bleeding. Fibrinogen is a key component in blood clot formation
technology? and levels in the body drop fast and early during an emergent
major bleeding event. Low levels of fibrinogen can lead to
impaired blood clot formation which is life threatening.
Cryoprecipitate, the current standard of care, requires long
processing times and transport to the point of care. Because of
this, patients suffering from acquired fibrinogen deficiency
during this early, critical period of a major bleed are often not
treated as clinicians do not have a quickly available option to
supplement declining fibrinogen levels. This potentially leads to
adverse outcomes ranging from longer ICU stays to exsanguination.
FIBRYGA[supreg] can be stored at room temperature and
reconstituted quickly. These two properties allow it to be stored
near the point of care and delivered quickly to bleeding patients
who might otherwise not have received therapy. For the first time,
FIBRYGA[supreg] offers an FDA-approved rapid treatment option for
acquired hypofibrinogenemia in emergent bleeds.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We note the following concerns with regard to the newness
criterion. While the applicant asserted that FIBRYGA[supreg] is
currently the only FDA-approved therapy for treating acquired
fibrinogen deficiency as a result of major bleeding, we note that
INTERCEPT[supreg] Fibrinogen Complex, which is the pathogen reduced
cryoprecipitated fibrinogen complex (PRCFC) produced by the
INTERCEPT[supreg] Blood System, is FDA-approved for the treatment and
control of bleeding, including massive hemorrhage, associated with
fibrinogen deficiency. The applicant further asserted that
FIBRYGA[supreg] can be stored at room temperature, allowing it to be
delivered quickly to bleeding patients and offering an FDA-approved
rapid treatment option for acquired hypofibrinogenemia in emergent
bleeds. However, we note that INTERCEPT[supreg] Fibrinogen Complex has
a 5-day shelf life at room temperature and is immediately available in
a ready-to-transfuse form as a fibrinogen source.75 76
Therefore, we question whether FIBRYGA[supreg] and INTERCEPT[supreg]
Fibrinogen Complex involve the treatment of the same or similar type of
disease and the same or similar patient population. In addition, we
note that the applicant asserted that FIBRYGA[supreg] has the same
mechanism of action used by cryoprecipitate and works by providing a
source of fibrinogen the body can use to form blood clots to stop
bleeding. We also note that INTERCEPT[supreg] Fibrinogen Complex
provides a source of fibrinogen, and therefore, we question whether
FIBRYGA[supreg] and INTERCEPT[supreg] Fibrinogen Complex have the same
mechanism of action. We also note that the applicant asserted that use
of FIBRYGA[supreg] is not expected to change the MS-DRG assignment for
cases of acquired hypofibrinogenemia, and we therefore believe it would
map to the same MS-DRGs as INTERCEPT[supreg] Fibrinogen Complex.
---------------------------------------------------------------------------
\75\ Cerus Corporation. INTERCEPT[supreg] Blood System for
Cryoprecipitation Package Insert For the manufacturing of Pathogen
Reduced Cryoprecipitated Fibrinogen Complex. (Revised 5/2024).
Available at: www.fda.gov/media/143996/download.
\76\ https://intercept-usa.com/products/intercept-fibrinogen-
complex/
#:~:text=INTERCEPT%C2%AE%20Fibrinogen%20Complex%20is,day%20post%2Dtha
w%20shelf%20life.
---------------------------------------------------------------------------
Therefore, as it appears that FIBRYGA[supreg] and INTERCEPT[supreg]
Fibrinogen Complex may use the same or similar mechanism of action to
achieve a therapeutic outcome, are assigned to the same MS-DRGs, and
treat the same or similar patient population and disease, we believe
that these technologies may be substantially similar to each other. We
note that, per our policy, if these technologies are substantially
similar to each other, we use the earliest market availability date as
the beginning of the newness period for the technologies. Therefore, if
FIBRYGA[supreg] is substantially similar to INTERCEPT[supreg]
Fibrinogen Complex, we believe the newness period for this technology
would begin on May 5, 2021, the date INTERCEPT[supreg] Fibrinogen
Complex became commercially available.\77\ In addition, because the 3-
year anniversary date of the INTERCEPT[supreg] Fibrinogen Complex's
entry onto the U.S. market (May 5, 2024) occurred in FY 2024,
FIBRYGA[supreg] would not be considered new and would not be eligible
for new technology add-on payments for FY 2026. We are interested in
information on how these technologies may differ from each other with
respect to the substantial similarity criteria and newness criterion.
---------------------------------------------------------------------------
\77\ INTERCEPT[supreg] Blood System received FDA approval on
November 24, 2020, to produce PRCFC; however, as noted in FY 2022
IPPS/LTCH PPS final rule (86 FR 45149), the manufacturers stated
that it was not available for sale until May 5, 2021.
---------------------------------------------------------------------------
We are inviting public comment on whether FIBRYGA[supreg] meets the
newness criterion, including whether FIBRYGA[supreg] is substantially
similar to INTERCEPT[supreg] Fibrinogen Complex for purposes of new
technology add-on payments.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that FIBRYGA[supreg] meets the cost criterion.
The analysis followed the order of operations summarized in the
following table.
FIBRYGA[supreg] Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes and MS-DRGs
used by the applicant, see the cost criterion codes and MS-DRGs
attachment included in the online posting for FIBRYGA[supreg].
[[Page 18115]]
Claims identified...................... 18,037 claims mapping to 468 MS-DRGs, with none exceeding more than
12.55% of the total identified cases.
Charges removed for prior technology... The applicant did not remove any direct or indirect charges related to
the prior technology. Per the applicant, FIBRYGA[supreg] is expected
to be additive to current treatments and no charges were removed from
the claims used in the analysis.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2025 IPPS/LTCH PPS final rule.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of the new technology by the national average cost-to-charge ratio of
0.246 for Blood and Blood Products from the FY 2025 IPPS/LTCH PPS
final rule. The applicant did not add indirect charges related to the
new technology.
Cost analysis results.................. Average case-weighted threshold amount: $105,002.
Final inflated average case-weighted standardized charge per case:
$188,525.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant asserted that FIBRYGA[supreg] meets the cost criterion.
We are inviting public comments on whether FIBRYGA[supreg] meets
the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that FIBRYGA[supreg] represents a substantial
clinical improvement over existing technologies because FIBRYGA[supreg]
is the only currently available, FDA-approved, pharmaceutical-grade
therapy for the treatment of acquired fibrinogen deficiency, and it
provides a faster, more precise treatment option for patients with
life-threatening bleeding. Additionally, the applicant asserted that
patients receiving FIBRYGA[supreg] have better clinical outcomes
relative to technologies previously available. The applicant provided
four documents and the FIBRYGA[supreg] package insert to support these
claims, as well as 17 background articles about the safety and efficacy
of existing treatment options for fibrinogen supplementation. The
following table summarizes the applicant's assertions regarding the
substantial clinical improvement criterion. Please see the online
posting for FIBRYGA[supreg] for the applicant's complete statements
regarding the substantial clinical improvement criterion and the
supporting evidence provided.
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments
----------------------------------------------------------------------------------------------------------------
FIBRYGA[supreg] is the only FDA FIBRYGA[supreg] Package Insert: https://www.fda.gov/media/105864/
approved therapy for the treatment of download#:~:text=FIBRYGA%20is%20a%20human%20fibrinogen%20concentrate.
acquired fibrinogen deficiency.
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
Pathogen inactivation makes Callum J, Farkouh ME, Scales DC, Heddle NM, Crowther M, Rao V, Hucke
FIBRYGA[supreg] a potentially safer HP, Carroll J, Grewal D, Brar S, Bussi[egrave]res J, Grocott H, Harle
source for fibrinogen supplementation C, Pavenski K, Rochon A, Saha T, Shepherd L, Syed S, Tran D, Wong D,
in the treatment of bleeding. Zeller M, Karkouti K; FIBRES Research Group. Effect of Fibrinogen
Concentrate vs Cryoprecipitate on Blood Component Transfusion After
Cardiac Surgery: The FIBRES Randomized Clinical Trial. JAMA. 2019 Nov
26; 322(20):1966-1976. doi: 10.1001/jama.2019.17312. PMID: 31634905;
PMCID: PMC6822637.
FIBRYGA[supreg] Package Insert.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
As compared to cryoprecipitate, the Roy A, Stanford S, Nunn S, Alves S, Sargant N, Rangarajan S, Smith EA,
current standard of care, Bell J, Dayal S, Cecil T, Tzivanakis A, Kruzhkova I, Solomon C, Knaub
FIBRYGA[supreg] permits rapid S, Moran B, Mohamed F. Efficacy of fibrinogen concentrate in major
correction of low serum fibrinogen abdominal surgery--A prospective, randomized, controlled study in
levels in bleeding patients. cytoreductive surgery for pseudomyxoma peritonei. J Thromb Haemost.
2020 Feb;18(2):352-363. doi: 10.1111/jth.14665. Epub 2019 Nov 26.
PMID: 31654548; PMCID: PMC7027898.
FIBRYGA[supreg] Package Insert.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
FIBRYGA[supreg] decreases the use of Lunde J, Stensballe J, Wikkels[oslash] A, Johansen M, Afshari A.
allogeneic blood products which are Fibrinogen concentrate for bleeding--a systematic review. Acta
associated with higher rates of Anaesthesiol Scand. 2014 Oct;58(9):1061-74. doi: 10.1111/aas.12370.
adverse events post-transfusion. Epub 2014 Jul 24. PMID: 25059813.
Callum, 2019, op. cit.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
[[Page 18116]]
FIBRYGA[supreg] is highly purified and Schulz PM, Gehringer W, N[ouml]hring S, M[uuml]ller S, Schmidt T,
has consistent levels of fibrinogen, Kekeiss-Schertler S, Solomon C, Pock K, R[ouml]misch J. Biochemical
permitting precise serum fibrinogen characterization, stability, and pathogen safety of a new fibrinogen
correction without delivering unneeded concentrate (fibryga[supreg]). Biologicals. 2018 Mar;52:72-77. doi:
components associated with adverse 10.1016/j.biologicals.2017.12.003. Epub 2018 Jan 12. PMID: 29336864.
reactions. FIBRYGA[supreg] Package Insert.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
----------------------------------------------------------------------------------------------------------------
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
FIBRYGA[supreg].
After review of the supporting evidence provided by the applicant,
we have the following concerns regarding whether FIBRYGA[supreg] meets
the substantial clinical improvement criterion. While the applicant
asserted that FIBRYGA[supreg] is the only FDA-approved technology for
the treatment of acquired fibrinogen deficiency, we note that there are
other available treatments, including cryoprecipitate and
INTERCEPT[supreg] Fibrinogen Complex, which is FDA-approved for the
treatment and control of bleeding, including massive hemorrhage,
associated with fibrinogen deficiency, including those with acquired
fibrinogen deficiency.\78\ We therefore question the assertion that
FIBRYGA[supreg] offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments.
---------------------------------------------------------------------------
\78\ Cerus Corporation. INTERCEPT[supreg] Blood System for
Cryoprecipitation Package Insert For the manufacturing of Pathogen
Reduced Cryoprecipitated Fibrinogen Complex. (Revised 5/2024).
Available at: https://www.fda.gov/media/143996/download.
---------------------------------------------------------------------------
With respect to the assertion that FIBRYGA[supreg] significantly
improves clinical outcomes relative to services or technologies
previously available, we note that the applicant claimed that pathogen
inactivation makes FIBRYGA[supreg] a potentially safer source for
fibrinogen supplementation, FIBRYGA[supreg] permits rapid correction of
fibrinogen levels, and FIBRYGA[supreg] has consistent levels of
fibrinogen which allow for precise serum fibrinogen correction without
delivering unneeded components associated with adverse reactions, and
that these claims demonstrate that FIBRYGA[supreg] improves outcomes.
However, while for each of these three claims the applicant inferred
that they potentially improve safety or outcomes, it did not provide
data that tested or demonstrated improvements. Therefore, we are
unclear how these claims relate to a demonstration of substantial
clinical improvement over existing technologies because they do not
pertain to clinical outcomes described at Sec. 412.87(b)(1)(ii)(C),
such as a reduction in mortality or a decreased rate of at least one
subsequent diagnostic or therapeutic intervention. For example, with
regard to pathogen inactivation, while the applicant stated that the
overall reduction in viral titers achieved with INTERCEPT[supreg]
Fibrinogen Complex is lower than those achieved with FIBRYGA[supreg]'s
manufacturing process, we note that the background studies that were
provided discussed why pathogen activation is important but did not
demonstrate reduced pathogen transmission as compared to existing
options such as INTERCEPT[supreg] Fibrinogen Complex or cryoprecipitate
in order to demonstrate improved outcomes. We further note that the
FIBRES study, a randomized controlled trial of 827 patients requiring
blood component transfusion after cardiac surgery at 11 Canadian
hospitals, did not report differences between the FIBRYGA[supreg] and
cryoprecipitate groups' adverse events associated with bloodborne
pathogens, which may include fever, chills, nausea, vomiting,
hypotension, tachycardia, abdominal pain, back pain, or disseminated
intravascular coagulation, and we question if the length of patient
follow-up (28 days) is sufficient to assess for bloodborne infection
transmission.79 80 With regards to the claim that
FIBRYGA[supreg] allows for precise serum fibrinogen correction without
delivering unneeded components associated with adverse reactions, while
the applicant provided a biochemical analysis of FIBRYGA[supreg] by
Schulz et al. to demonstrate that FIBRYGA[supreg]'s manufacturing
process leads to consistent levels of fibrinogen and low levels of von
Willebrand factor, as well as background documents discussing levels of
fibrinogen and other factors for cryoprecipitate and INTERCEPT[supreg]
Fibrinogen Complex, these documents did not demonstrate precise
fibrinogen correction using FIBRYGA[supreg] compared to other available
treatment options. Also, while the applicant further stated that
FIBRYGA[supreg]'s manufacturing process removes agents responsible for
allergic transfusion reactions and transfusion related lung injury, the
evidence provided did not assess these outcomes or otherwise
demonstrate reduced incidence of these outcomes as compared to
available standard of care treatments for the patient population.
---------------------------------------------------------------------------
\79\ Association for the Advancement of Blood & Biotherapies.
(2024). Circular of information for the use of human blood and blood
components. American Red Cross, America's Blood Centers, Armed
Services Blood Program. Retrieved on November 14, 2024, from https://www.aabb.org/docs/default-source/default-document-library/resources/circular-of-information-watermark.pdf.
\80\ Bloch, E.M. (2024). Transfusion-transmitted bacterial
infection. UpToDate. Retrieved December 16, 2024, from https://www.uptodate.com/contents/transfusion-transmitted-bacterial-infection.
---------------------------------------------------------------------------
In addition, we note that none of the studies submitted
demonstrated improvements in clinical outcomes, such as treatment
emergent adverse events (TEAEs), length of ICU stay, and duration of
hospitalization between FIBRYGA[supreg] and cryoprecipitate study
treatment groups. We note the FIBRES study found that TEAEs (acute
kidney injury, hepatobiliary disorders, and thromboembolic adverse
events) were similar between both groups and found no differences in
clinical outcomes between the groups (duration of mechanical
ventilation, duration of ICU stay, and duration of hospitalization). We
further note that the study authors disclosed several limitations of
the FIBRES study, including the lack of standardized transfusion
protocols, lack of strict timing of laboratory assessments, and the
variability in the amount of fibrinogen in cryoprecipitate that make it
difficult to interpret true differences in clinical outcomes between
the two groups. Regarding the FORMA-05 study, a single-center,
prospective, randomized control phase 2 study of 45 patients undergoing
cytoreductive surgery for peritoneal malignancy, we note that this
study did not demonstrate any differences in clinical outcomes for the
FIBRYGA[supreg] arm over the cryoprecipitate arm. Rather, per the
study, the median durations of surgery, artificial ventilation in the
ICU, ICU stay, hospitalization, and intraoperative blood loss were
comparable between groups, and there was no bleeding in
[[Page 18117]]
patients in either treatment group post-operatively through the
assessments at 24 and 48 hours. We also note that both studies were
conducted outside of the U.S., and the study populations were specific
groups of surgical patients, which may impact the generalizability of
these results to broader, more diverse clinical use cases for
FIBRYGA[supreg] in the U.S. Medicare patient population. In addition,
both studies compared FIBRYGA[supreg] with cryoprecipitate, and no
studies comparing to the currently available INTERCEPT[supreg]
Fibrinogen Complex were provided. While the applicant included the
INTERCEPT[supreg] package insert, it contains only in vitro data and
does not offer clinical comparisons. We are interested in information
on clinical outcomes of FIBRYGA[supreg] in comparison to
INTERCEPT[supreg] Fibrinogen Complex in order to evaluate whether the
use of FIBRYGA[supreg] significantly improves clinical outcomes
compared to available treatments.
We also note regarding the applicant's claim that FIBRYGA[supreg]
permits rapid correction of low serum fibrinogen levels in bleeding
patients compared to cryoprecipitate, while the applicant stated that
the FORMA-05 study demonstrated that FIBRYGA[supreg] was delivered to
the patient 46 minutes faster than cryoprecipitate (0.90 hours (0.23) versus 1.30 hours (0.33), p<0.0001), this value
does not measure the time to correction of fibrinogen levels. We
further note that, in the study, the difference between arms decreased
from 46 minutes to 24 minutes with regard to time to when the
intervention was administered (2.02 hours 0.22 for
FIBRYGA[supreg] and 2.42 hours 0.33 for cryoprecipitate),
and the study did not measure time to correction of fibrinogen levels,
though as noted, this is a surrogate measure and not a clinical outcome
as described under the regulations at Sec. 412.87(b)(1)(ii)(C).
Further, while the applicant also provided background studies to
demonstrate the correlation between low serum fibrinogen and poor
patient outcomes, and that faster replenishment is important, as noted,
the FORMA-05 study did not demonstrate any differences in clinical
outcomes between arms. We also note that the applicant stated that
FIBRYGA[supreg] allows for more rapid availability due to its powder
form which allows long-term storage at room temperature in proximity to
patients, while INTERCEPT[supreg] Fibrinogen Complex, which can be also
stored at room temperature for up to 5 days, must be kept in regulated
blood bank storage distant from the patient even when thawed. However,
no data was provided to demonstrate that time to administration of
FIBRYGA[supreg], or time to serum fibrinogen correction with
FIBRYGA[supreg], is faster than that of INTERCEPT[supreg] Fibrinogen
Complex.
In regard to the applicant's fourth claim that FIBRYGA[supreg]
decreases the use of allogeneic blood products, which the applicant
asserted are associated with higher rates of adverse events post-
transfusion, we question whether the Lunde et al. (2014) and FIBRES
studies provided in support of this claim showed that FIBRYGA[supreg]
resulted in lower rates of post-transfusion adverse events. We note
that Lunde et al. (2014) study was a systematic review of six RCTs that
evaluated fibrinogen concentrate broadly to determine the evidence for
its use and efficacy, but the studies included were varied in choice of
comparator, including fresh frozen plasma (FFP), cryoprecipitate, or no
comparator. We are also unclear whether the fibrinogen concentrate
included in the study refers specifically to FIBRYGA[supreg], and
therefore question whether the study provides evidence that
FIBRYGA[supreg] demonstrates improved outcomes compared to
cryoprecipitate. We further note that the study authors determined that
data on continuous outcomes such as quantity of FFP, RBC or platelet
transfused were statistically skewed, often with the median equaling
zero, and that the comparison of fibrinogen concentrate to any
comparator with respect to adverse events was not statistically
significant. We also note that the six RCTs that the study is based on
are more than 10 years old, and thus, we question whether the findings
adequately represent the current standard of care for this patient
population that may have evolved over the last decade. We further note
that, although the FIBRES study was provided to demonstrate that
FIBRYGA[supreg] decreases the use of allogeneic blood products, the
study did not specifically report transfusion-related adverse events.
We would be interested in additional data regarding transfusion-related
adverse events, such as urticaria, wheezing, hypotension, tachycardia,
nausea, vomiting and/or diarrhea, abdominal pain, severe dyspnea,
pulmonary and/or laryngeal edema, and bronchospasm and/or
laryngospasm.\81\
---------------------------------------------------------------------------
\81\ Association for the Advancement of Blood & Biotherapies,
2024, op. cit.
---------------------------------------------------------------------------
We are inviting public comments on whether FIBRYGA[supreg] meets
the substantial clinical improvement criterion.
g. GRAFAPEX\TM\ (Treosulfan)
Medexus Pharma, Inc. submitted an application for new technology
add-on payments for GRAFAPEXTM for FY 2026. According to the
applicant, GRAFAPEXTM is a novel conditioning agent for use
in combination with fludarabine as a preparative regimen for allogeneic
hematopoietic stem cell transplantation (allo-HSCT) in adult and
pediatric patients one year of age and older with acute myeloid
leukemia (AML) or myelodysplastic syndrome (MDS). We note that Medexus
Pharma, Inc. submitted an application for new technology add-on
payments for GRAFAPEXTM for FY 2023 under the name
treosulfan, as summarized in the FY 2023 IPPS/LTCH PPS proposed rule
(87 FR 28296 through 28302), that it withdrew prior to the issuance of
the FY 2023 IPPS/LTCH PPS final rule (87 FR 48920).
Please refer to the online application posting for
GRAFAPEXTM, available at https://mearis.cms.gov/public/publications/ntap/NTP241007WE8D6, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
GRAFAPEXTM was granted NDA approval from FDA on January 21,
2025, for use in combination with fludarabine as a preparative regimen
for allo-HSCT in adult and pediatric patients one year of age and older
with either AML or MDS. The applicant stated that GRAFAPEXTM
became commercially available on February 20, 2025, because the
applicant required time after FDA marketing authorization to build
inventory and stock the third-party logistic wholesalers prior to
commercial launch. We are interested in additional information
regarding the cause of any delay in the technology's commercial
availability, such as additional information about building inventory
and stocking logistic wholesalers.
According to the applicant, GRAFAPEXTM is administered
via intravenous infusion in conjunction with fludarabine from either a
1g or 5g vial after reconstitution with a 20mL or 100mL solution. Per
the package insert,\82\ the recommended dosage of GRAFAPEXTM
is 10g/m\2\ body surface area per day, given as a 2-hour intravenous
infusion on 3 consecutive days (day -4, -3, -2) in conjunction with
fludarabine before hematopoietic stem cell infusion on day 0. Per the
[[Page 18118]]
applicant, based on the estimated average body size for Medicare
patients being treated with GRAFAPEXTM and the labeling for
a 3-day treatment, the estimated average dose per inpatient stay is
54g.
---------------------------------------------------------------------------
\82\ Oncotec Pharma Produktion GmbH. GRAFAPEXTM
[package insert]. (Revised 2/2025). Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2025/214759s001lbl.pdf.
---------------------------------------------------------------------------
According to the applicant, effective October 1, 2022, the
following ICD-10-PCS codes may be used to uniquely describe procedures
involving the use of GRAFAPEXTM: XW04388 (Introduction of
treosulfan into central vein, percutaneous approach, new technology
group 8) or XW03388 (Introduction of treosulfan into peripheral vein,
percutaneous approach, new technology group 8). The applicant provided
a list of diagnosis codes that may be used to currently identify the
indication for GRAFAPEXTM under the ICD-10-CM coding system.
Please refer to the online application posting for the complete list of
ICD-10-CM codes provided by the applicant.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that GRAFAPEXTM is not substantially similar to
other currently available technologies because GRAFAPEXTM is
a new chemical entity with a unique structure and unique mechanism of
action that permits it to be metabolized without the liver, resulting
in reduced toxicity while still delivering effective treatment,
including for older and/or more comorbid patients who are ineligible
for myeloablative conditioning (MAC) and face higher relapse risk if
reduced intensity conditioning (RIC) is used. The applicant stated that
GRAFAPEXTM addresses the unmet need in this patient
population and is the only FDA-approved allo-HSCT conditioning agent
for AML and MDS, and that therefore, the technology meets the newness
criterion. The following table summarizes the applicant's assertions
regarding the substantial similarity criteria. Please see the online
application posting for GRAFAPEXTM for the applicant's
complete statements in support of its assertion that
GRAFAPEXTM is not substantially similar to other currently
available technologies.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... As a prodrug, GRAFAPEXTM is activated under normal physiological
action to achieve a therapeutic outcome? conditions with its own distinct cytotoxic activity toward
hematopoietic precursor cells. GRAFAPEXTM has a unique mechanism
of action that permits it to bypass the liver when it metabolizes,
resulting in reduced toxicity while still delivering effective
treatment, including for older patients and/or patients with
significant comorbidities who are ineligible for MAC. Other
alkylating agents used to date in allo-HSCT conditioning--for
example, busulfan, melphalan, cyclophosphamide--are all
metabolized by the liver, which results in higher toxicity and
leads to excess regimen-related morbidity and mortality observed
in older and comorbid patients. GRAFAPEXTM's mechanism of action
differs from other agents in this class because no other
alkylating agent has a mechanism of action that bypasses treated
patients' liver.
GRAFAPEXTM also has a unique chemical structure resulting from two
hydroxide (OH) bonds not present in other alkylating agents. Due
to these OH bonds, GRAFAPEXTM's mechanism of alkylation is
entirely different compared to busulfan and other alkylating
agents. Its distinct structure and unique mechanism of alkylation
further distinguish GRAFAPEXTM's mechanism of action. GRAFAPEXTM's
activity is due to the spontaneous, pH-dependent conversion into a
monoepoxide intermediate and diepoxybutan that bypasses liver
metabolism. These epoxides alkylate and crosslink nucleophilic
centers of DNA and other biological molecules involved in various
physiological functions and are responsible for its stem cell
depleting, immunosuppressive, and antineoplastic effects. Because
GRAFAPEXTM uniquely bypasses liver metabolism, it reduces
treatment-related toxicity compared to other alkylating agents
used to date for allo-HSCT conditioning.
Is the technology assigned to the same MS-DRG as existing Yes.................... Medexus anticipates that inpatient cases involving administration
technologies? of GRAFAPEXTM typically will be assigned to MS-DRG 014--Allogeneic
Bone Marrow Transplant--because, in a majority of cases, it is
anticipated that a patient would undergo GRAFAPEXTM-based
conditioning during the same inpatient admission as allo-HSCT
itself. It is Medexus's understanding that other conditioning
treatments prior to allo-HSCT also would typically be assigned to
MS-DRG 014. Some cases also may be assigned to MS-DRG 004.
[[Page 18119]]
Does new use of the technology involve the treatment of No..................... GRAFAPEXTM offers a critical new treatment option for allo-HSCT
the same/similar type of disease and the same/similar conditioning for a different patient population compared to
patient population when compared to an existing existing technologies. Many patients--especially older patients
technology? and/or patients with significant comorbidities who have AML or
MDS--are ineligible for MAC and face higher relapse risk with RIC.
Multiple studies discuss the unmet need for this patient
population based on previously available regimens and show that
GRAFAPEXTM-based regimens are particularly well-suited and provide
significant clinical benefits for this patient population. If
approved, GRAFAPEXTM will be the only FDA-approved allo-HSCT
conditioning agent for AML and MDS. A landmark multicenter RCT
discusses how allo-HSCT conditioning regimens available to date
are not suitable for all patients, especially older and/or more
comorbid patients--an important population for Medicare. The
limits of MAC and RIC create an unmet medical need particularly
for the growing number of older or comorbid AML and MDS
transplantation candidates. Peer-reviewed studies confirm
GRAFAPEXTM addresses the unmet need for this patient population,
including studies comparing GRAFAPEXTM-based regimens to busulfan-
, melphalan-, cyclophosphamide-, and TBI-based regimens.
GRAFAPEXTM-based conditioning thus involves treatment of a
different patient population compared to previously existing
conditioning regimens.
--------------------------------------------------------------------------------------------------------------------------------------------------------
With respect to the substantial similarity criteria, we note that
GRAFAPEXTM is an alkylating agent like other drugs used in
conditioning, such as busulfan and melphalan. While the applicant
stated that GRAFAPEXTM has a unique mechanism of action and
unique structure that allows it to bypass liver metabolism, reducing
toxicity, we question whether bypassing liver metabolism is the
mechanism of action of a conditioning agent, or if it instead relates
to clinical outcomes, such as the side effect profile of
GRAFAPEXTM. In regard to whether GRAFAPEXTM
treats the same or similar type of disease and the same or similar
patient population compared to existing technologies, we question
whether GRAFAPEXTM treats a new patient population since
MAC, nonmyeloablative conditioning (NMA), and RIC are all options for
patients. Additionally, while MAC may not be preferred for older or
comorbid patients, RIC and NMA may still be options for these patients.
We are inviting public comments on whether GRAFAPEXTM is
substantially similar to existing technologies and whether
GRAFAPEXTM meets the newness criterion.
With respect to the cost criterion, the applicant provided two
analyses to demonstrate that GRAFAPEXTM meets the cost
criterion. Each analysis followed the order of operations summarized in
the following table.
GRAFAPEXTM Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes, ICD-10-PCS
codes, and MS-DRGs used by the applicant, see the cost criterion codes
and MS-DRGs attachment included in the online posting for GRAFAPEXTM.
Claims identified...................... Scenario 1: 713 claims mapping to 2 MS-DRGs, with 98.46% of claims
mapping to MS-DRG 014 (Allogeneic Bone Marrow Transplant) and 1.54% of
claims mapping to MS-DRG 004 (Tracheostomy With MV >96 Hours Or
Principal Diagnosis Except Face, Mouth And Neck Without Major O.R.
Procedures).
Scenario 2: 466 claims mapping to two MS-DRGs, with 97.64% of claims
mapping to MS-DRG 014 (Allogeneic Bone Marrow Transplant) and 2.36% of
claims mapping to MS-DRG 004 (Tracheostomy With MV >96 Hours Or
Principal Diagnosis Except Face, Mouth And Neck Without Major O.R.
Procedures).
Charges removed for prior technology... The applicant removed 100% of charges associated with drugs and
cellular therapies (revenue centers 025x, 026x, and 063x), as an
estimate of the percentage of total charges that the technology would
replace could not be determined. The applicant did not remove indirect
charges related to the prior technology.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2023 IPPS/LTCH PPS final rule
correcting amendment.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of the new technology by the national average cost-to-charge ratio of
0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS
final rule. The applicant did not add indirect charges related to the
new technology.
Cost analysis results.................. Scenario 1:
--Average case-weighted threshold amount: $368,736.
--Final inflated average case-weighted standardized charge per case:
$559,537.
Scenario 2:
--Average case-weighted threshold amount: $368,795.
--Final inflated average case-weighted standardized charge per case:
$559,369.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
both scenarios, the applicant asserted that GRAFAPEXTM meets
the cost criterion.
[[Page 18120]]
We are inviting public comments on whether GRAFAPEXTM
meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that GRAFAPEXTM offers a treatment option
for a patient population unresponsive to, or ineligible for, currently
available treatments because GRAFAPEXTM offers a critical
new treatment option and addresses an unmet need for allo-HSCT
conditioning for older and/or more comorbid patients who have AML or
MDS and are ineligible for currently available MAC regimens and face
higher relapse risk if a RIC regimen is used. Additionally, per the
applicant, GRAFAPEXTM significantly improves clinical
outcomes relative to existing technologies because
GRAFAPEXTM-based conditioning has shown superiority in
survival (in terms of overall and event-free survival) and non-relapse
mortality, as well as significant reductions in adverse events, such as
graft-versus-host disease (GVHD), veno-occlusive disease (VOD), and
infections, compared to previously available regimens. The applicant
provided 10 studies to support these claims, as well as 1 background
article that, per the applicant, indicates that many patients with AML
or MDS, especially those who are older and/or have significant
comorbidities, are ineligible for MAC regimens, and face higher risk of
relapse with RIC regimens.\83\ The following table summarizes the
applicant's assertions regarding the substantial clinical improvement
criterion. Please see the online posting for GRAFAPEXTM for
the applicant's complete statements regarding the substantial clinical
improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------
\83\ Background articles are not included in the following table
but can be accessed via the online posting for the technology.
------------------------------------------------------------------------
Applicant statements in Supporting evidence provided by the
support applicant
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a
treatment option for a patient population unresponsive to, or ineligible
for, currently available treatments
------------------------------------------------------------------------
GRAFAPEXTM offers a Beelen DW, Iacobelli S, Koster L, et al.
treatment option for allo- Fludarabine-treosulfan versus fludarabine-
HSCT conditioning for older melphalan or busulfan-cyclophosphamide
and/or more comorbid conditioning in older AML or MDS
patients who have AML or patients--A clinical trial to registry
MDS, who are ineligible for data comparison. Bone Marrow Transplant.
currently available MAC 2024;59(5):670-679.
regimens. Wedge E, Sengel[oslash]v H, Hansen JW, et
al. Improved Outcomes after Allogenic
Hematopoietic Stem Cell Transplantation
with Fludarabine/Treosulfan for Patients
with Myelodysplastic Syndromes. Biol
Blood Marrow Transplant. 2020;26(6):1091-
1098.
Fraccaroli A, Stauffer E, Haebe S, et al.
Treosulfan-Versus Melphalan-Based Reduced
Intensity Conditioning in HLA-
Haploidentical Transplantation for
Patients >= 50 Years with Advanced MDS/
AML. Cancers (Basel). 2024;16(16):2859.
Bug G, Labopin M, Niittyvuopio, R, et al.
Fludarabine/TBI 8 Gy versus fludarabine/
treosulfan conditioning in patients with
AML in first complete remission: a study
from the Acute Leukemia Working Party of
the EBMT. Bone Marrow Transplant.
2023;58(6):710-716.
Nagler A, Labopin M, Beelen D, et al. Long-
term outcome after a treosulfan-based
conditioning regimen for patients with
acute myeloid leukemia: A report from the
Acute Leukemia Working Party of the
European Society for Blood and Marrow
Transplantation. Cancer.
2017;123(14):2671-2679.
Gavriilaki E, Sakellari Ioanna, Labopin,
et al. Survival advantage of treosulfan
plus fludarabine (FT14) compared to
busulfan plus fludarabine (FB4) in active
acute myeloid leukemia post allogeneic
transplantation: an analysis from the
European Society for Blood and Marrow
Transplantation (EBMT) Acute Leukemia
Working Party (ALWP). Bone Marrow
Transplant. 2023;58(10):1084-1088.
Pasic I, Moya TA, Remberger Mats, et al.
Treosulfan- Versus Busulfan-based
Conditioning in Allogeneic Hematopoietic
Cell Transplantation for Myelodysplastic
Syndrome: A Single-center Retrospective
Propensity Score-matched Cohort Study.
Transplant Cell Ther. 2024;30(7):681.e1-
681.e11.
Chichra A, Nayak L, Kothari R, et al.
Fludarabine melphalan versus fludarabine
treosulfan for reduced intensity
conditioning regimen in allogeneic
hematopoietic stem cell transplantation:
a retrospective analysis. Int J Hematol.
2024;119(1):71-79.
Beelen DW, Stelljes M, Rem[eacute]nyi P,
et al. Treosulfan compared with reduced-
intensity busulfan improves allogeneic
hematopoietic cell transplantation
outcomes of older acute myeloid leukemia
and myelodysplastic syndrome patients:
Final analysis of a prospective
randomized trial. Am J Hematol.
2022;97(8):1023-1034.
Shimoni A, Robin M, Iacobelli S, et al.
Allogeneic hematopoietic cell
transplantation in patients with
myelodysplastic syndrome using treosulfan
based compared to other reduced-intensity
or myeloablative conditioning regimens. A
report of the chronic malignancies
working party of the EBMT. Br J Haematol.
2021;195(3):417-428.
The applicant also provided background
information to support this claim, which
can be accessed via the online posting
for the technology.
------------------------------------------------------------------------
[[Page 18121]]
Substantial Clinical Improvement Assertion #2: The technology
significantly improves clinical outcomes relative to services or
technologies previously available
------------------------------------------------------------------------
GRAFAPEXTM-based Beelen, 2024, op. cit.
conditioning has shown Wedge, 2020, op. cit.
superior outcomes for event- Fraccaroli, 2024, op. cit.
free survival (EFS), Bug, 2023, op. cit.
overall survival (OS), and Nagler, 2017, op. cit.
non-relapse mortality Gavriilaki, 2023, op. cit.
(NRM), and significant Pasic, 2024, op. cit.
reductions in several Chichra, 2024, op. cit.
adverse events. Beelen, 2022, op. cit.
Shimoni, 2021, op. cit.
------------------------------------------------------------------------
We also received a public comment in response to the New Technology
Town Hall meeting notice published in the Federal Register regarding
the substantial clinical improvement criterion for
GRAFAPEXTM, which we summarize in this section.
Comment: The applicant submitted a public comment summarizing the
claims from its application regarding why it believes
GRAFAPEXTM meets the substantial clinical improvement
criterion. Additionally, the applicant provided additional information
related to questions raised at the Town Hall meeting. With regard to a
question asking for clarification with respect to whether any of the
studies cited by the applicant compared GRAFAPEXTM-based
conditioning to other reduced-toxicity conditioning (RTC) regimens, the
applicant stated the classification concept of MAC and RIC regimens was
defined around 2009. According to the applicant, Spyridonidis et al.
(2020) introduced a new tool for measuring conditioning regimen
intensity, called transplant conditioning intensity (TCI).\84\ The
applicant quoted Spyridonidis et al. (2020) and stated that TCI
``provides an improvement of the RIC/MAC classification'' and
``enable[s] the identification of a distinct subgroup of RIC and MAC
conditioning regimens with an intermediate TCI [2.5-3.5] score that had
identical outcomes and which are frequently referred [to] as `reduced
toxicity conditioning'.'' The applicant further noted that Spyridonidis
et al. (2020) developed the TCI scoring tool to address limitations of
the currently used RIC/MAC classification scheme. The applicant
suggested that other conditioning regimens could also be categorized as
RTC regimens based on this publication's TCI scoring methodology and
classification system.\85\ The applicant noted that although a number
of publications continued to use the MAC/RIC classification system,
rather than incorporating RTC terminology or other nomenclature
reflecting the TCI scoring classification system, Spyridonidis et al.
(2020) reflects a new paradigm shift in conditioning regimen
classification. Based on the TCI scoring methodology, the applicant
provided examples of peer-reviewed publications from its application
where both the GRAFAPEXTM plus fludarabine arm and
comparator arm in the study were conditioning regimens that the
applicant believed would likely be scored as intermediate-intensity or
RTC regimens, that is regimens with a TCI score of 2.5-3.5. The
applicant provided the following three examples.
---------------------------------------------------------------------------
\84\ Spyridonidis, A., Labopin, M., Savani, B.N., Niittyvuopio,
R., Blaise, D., Craddock, C., Soci[eacute], G., Platzbecker, U.,
Beelen, D., Milpied, N., Cornelissen, J.J., Ganser, A., Huynh, A.,
Griskevicius, L., Giebel, S., Brissot, E., Malard, F., Esteve, J.,
Peric, Z., Baron, F., . . . Mohty, M. (2020). Redefining and
measuring transplant conditioning intensity in current era: a study
in acute myeloid leukemia patients. Bone Marrow Transplantation,
55(6), 1114-1125. https://doi.org/10.1038/s41409-020-0803-y.
\85\ See Figure 1b in Spyridonidis et al. (2020) for additional
regimens with transplant conditioning intensity scores of 2.5-3.5
(intermediate/RTC range).
---------------------------------------------------------------------------
First, the applicant calculated TCI scores for the regimens
compared in Gavriilaki et al. (2023) based on dosage and the
Spyridonidis et al. (2020) methodology: fludarabine <160mg/m2 (0.5 TCI
score) plus GRAFAPEXTM 42g (3 TCI score) equates to a TCI
score of 3.5; fludarabine <160mg/m2 (0.5 TCI score) plus busulfan
12.8mg/kg (3 TCI score) equates to a TCI score of 3.5. The applicant
reiterated that Gavriilaki et al. (2023) found that the
GRAFAPEXTM-based conditioning demonstrated superiority in
overall survival (44.4 percent vs. 34 percent (p = 0.009)) and was
similar in non-relapse mortality compared to the busulfan-based
conditioning treatment in patients with relapsed or refractory AML.
Second, the applicant calculated TCI scores for the regimens
compared in Pasic et al. (2024) based on dosage and the Spyridonidis et
al. (2020) methodology: fludarabine 35mg/m2 x 4 (0.5 TCI score) plus
GRAFAPEXTM (2 or 3 TCI score) (depending on dose) equals a
TCI score of 2.5 or 3.5 (depending on the GRAFAPEXTM
dosage); fludarabine 35mg/m2 x 4 (0.5 TCI score) plus busulfan 3.2mg/kg
x 2 (1 TCI score) plus total body irradiation 2Gy (1 TCI score) equals
a TCI score of 2.5. The applicant reiterated the results from this
study, noting that the GRAFAPEXTM-based conditioning regimen
demonstrated superiority in overall survival, event-free survival, and
non-relapse mortality at 2 years follow-up, 2-year superiority in GVHD
relapse-free survival (GRFS), and a lower percentage of patients
requiring at least one hospital readmission at 1 year compared to the
comparison group (fludarabine+busulfan+total body irridation).
Third, the applicant calculated TCI scores for the regimens
compared in Chichra et al. (2023) based on dosage and the Spyridonidis
et al. (2020) methodology: fludarabine 30mg/m2 x 4 (0.5 TCI score) plus
GRAFAPEXTM 12-14g/m2 (2 or 3 TCI) (depending on dose) equals
a TCI score of 2.5 or 3.5 (depending on the GRAFAPEXTM
dosage); fludarabine (0.5 TCI score) plus melphalan 140mg/m2 (2 TCI
score) equals a TCI score of 2.5. The applicant restated the study's
results, including that the GRAFAPEXTM-based conditioning
group had fewer acute toxicities and fewer cases of severe mucositis
and diarrhea compared to the melphalan-based conditioning group.
The applicant also provided information related to the following
three points from its slide presentation at the new technology add-on
payment Town Hall: (1) previously available allo-HSCT conditioning
agents and regimens create an unmet need for conditioning treatment
that minimizes toxicity while maximizing efficacy, especially for older
patients and/or those with significant comorbidities; (2) other
conditioning agents used to date are all metabolized
[[Page 18122]]
by the liver, which results in higher toxicity and leads to ``excess
regimen-related morbidity and mortality observed in older and comorbid
patients;'' \86\ and (3) GRAFAPEXTM reduces treatment-
related toxicity because it uniquely bypasses liver metabolism. The
applicant restated information from its application, specifically
citing the Beelan et al. (2022) study in which 27 percent of patients
were ages 65 to 74 years. The applicant noted that this study did not
analyze the liver metabolism of conditioning agents but that it found a
GRAFAPEXTM and fludarabine conditioning regimen performed
better than a busulfan and fludarabine conditioning regimen in regards
to event-free survival, overall survival, and non-relapse mortality.
The applicant also stated that other alkylating agents used to date in
allo-HSCT conditioning, such as busulfan, melphalan, cyclophosphamide,
are all metabolized by the liver and that such metabolism by the liver
results in higher toxicity.\87\
---------------------------------------------------------------------------
\86\ Beelen, 2022, op. cit.
\87\ Scheulen, M.E., Hilger, R.A., Oberhoff, C., Casper, J.,
Freund, M., Josten, K.M., Bornh[auml]user, M., Ehninger, G., Berdel,
W.E., Baumgart, J., Harstrick, A., Bojko, P., Wolf, H.H., Schindler,
A.E., & Seeber, S. (2000). Clinical phase I dose escalation and
pharmacokinetic study of high-dose chemotherapy with treosulfan and
autologous peripheral blood stem cell transplantation in patients
with advanced malignancies. Clinical Cancer Research, 6(11), 4209-
16. https://aacrjournals.org/clincancerres/article/6/11/4209/199579/Clinical-Phase-I-Dose-Escalation-and.
---------------------------------------------------------------------------
Response: We thank the applicant for its comments. After review of
the information provided by the applicant and the public comment
received in response to the New Technology Town Hall meeting, we have
the following concerns regarding whether GRAFAPEXTM meets
the substantial clinical improvement criterion. The applicant stated
GRAFAPEXTM offers a conditioning treatment regimen option
for older and/or more comorbid patients with AML or MDS who are
ineligible for currently available MAC regimens due to their high
toxicity and higher relapse risk with RIC regimens. The applicant
provided 11 studies which it stated show that GRAFAPEXTM-
based regimens reduce the toxicity, non-relapse related mortality, and
treatment related mortality associated with MAC without resulting in
the increased incidence of relapse associated with RIC. However, we
note that in two studies provided by the applicant comparing a
GRAFAPEXTM-based regimen to RIC, there was a higher rate of
relapse with the GRAFAPEXTM-based regimen. Specifically, in
Fraccaroli et al. (2024), patients treated with a GRAFAPEXTM
regimen demonstrated a higher cumulative incidence of relapse compared
to the melphalan treatment group (24 percent vs. 0 percent, p=0.006).
Similarly, we note that Bug et al. (2023) found that a fludarabine plus
GRAFAPEXTM conditioning regimen had a higher cumulative
incidence of relapse (34.7 percent) compared to a fludarabine plus
fractionated total body irradiation conditioning regimen (18.3 percent,
p = 0.018).
Additionally, as the applicant noted in its Town Hall comment,
GRAFAPEXTM-based regimens are not the only intermediate-
intensity or RTC regimens. Specifically, the applicant mentioned three
additional RTC regimens in addition to GRAFAPEXTM-based
regimens: fludarabine <160mg/m2 plus busulfan 12.8mg/kg, fludarabine
35mg/m2 x 4 plus busulfan 3.2mg/kg x 2 plus total body irradiation 2Gy,
and fludarabine plus melphalan 140mg/m2. We also note that RIC and NMA
are additional options for these patients. Therefore, we question if
GRAFAPEXTM-based regimens are the only treatment options for
patients ineligible for MAC.
With respect to the assertion that GRAFAPEXTM
significantly improves clinical outcomes relative to services or
technologies previously available, the applicant stated that
GRAFAPEXTM-based conditioning has shown superior outcomes
for event-free survival, overall survival, and non-relapse mortality,
as well as significant reductions in several adverse events. To support
its statements, the applicant provided 1 randomized trial for
GRAFAPEXTM and 9 retrospective studies, which were also
cited in support of the prior claim. However, we question the
generalizability of these studies to the Medicare population. First,
none of the studies assessing GRAFAPEXTM evaluated the
treatment in a U.S. population; rather, all of the studies were
conducted outside the U.S, and we question whether differences in
treatment guidelines and regimens between countries could affect
generalizability to the Medicare population. Second, we note that, of
the submitted studies directly assessing GRAFAPEXTM, 7 had a
majority of participants in the GRAFAPEXTM treatment arm
under 65 years and 1 study (Wedge et al., 2020) did not include any
participants over 66 years of age in the GRAFAPEXTM
treatment group, and we therefore question whether outcomes seen in
these studies are generalizable to the Medicare population. Third,
relative to the number of Medicare patients with AML or MDS who may be
eligible for allo-HSCT, two studies (Chichra et al., 2023; Fraccaroli
et al., 2024) included small sample sizes among the
GRAFAPEXTM treatment arms. In particular, Chichra et al.
(2023) only contained 11 patients in the matched sibling donor/matched
unrelated (MRD/MUD) donor fludarabine plus GRAFAPEXTM group
and 16 patients in the haploidentical (Haplo) donor fludarabine plus
GRAFAPEXTM group. Fraccaroli et al. (2024) included only 21
patients in the melphalan group and 21 patients in the
GRAFAPEXTM group. Given these small sample sizes, we
question whether these studies would be generalizable to the Medicare
population due to the potential influence of confounding variables. We
also note that in Beelen et al. (2024), about half of the data was
missing for the comorbidity index and over half of the data was missing
regarding the disease risk, which are characteristics that could impact
efficacy, making it difficult to fully compare the treatment groups.
We further note that while some studies showed improved overall
survival, a lower NRM, and reduced adverse events with the
GRAFAPEXTM-based regimen, there were some conflicting
results across studies. First, while the applicant stated
GRAFAPEXTM-based regimens have shown improved overall
survival (OS), we note that in Bug et al. 2023, Chichra et al. 2023,
and Fraccaroli et al. 2024, OS was similar between the
GRAFAPEXTM-based regimen and RIC. Specifically, 2-year OS
was 67.8 percent in the GRAFAPEXTM-based regimen in Bug et
al. 2023 and 66.9 percent in the fludarabine/TBI group (HR 1.08 (95
percent CI, 0.67-1.75)). In Chichra et al. 2023, 5-year OS was 53
percent in those treated with a GRAFAPEXTM-based regimen
(Flu-Treo) and 62 percent in those treated with fludarabine/melphalan
(Flu-Mel) in the MRD/MUD transplant group (p=0.694) and 28 percent in
Flu-Treo and 41 percent in Flu-Mel in the Haplo transplant group
(p=0.770). In Fraccaroli et al. (2024), the 2-year survival was 66
percent in both the fludarabine-cyclophosphamide-melphalan and
fludarabine-cyclophosphamide-GRAFAPEXTM groups (p=0.8).
Second, the applicant asserted superior outcomes for
GRAFAPEXTM in non-relapse mortality (NRM). However, multiple
studies showed that GRAFAPEXTM had a NRM rate that was
higher than or similar to other technologies. Per Chichra et al.
(2023), the 2-year NRM was similar between Flu-Treo and Flu-Mel in the
MRD/MUD and Haplo groups, although the specific numbers were not
provided in the
[[Page 18123]]
study. In Gavriilaki et al. (2023), NRM was similar between
fludarabine/GRAFAPEXTM (FT14) (20.8 percent) and
fludarabine/busulfan (FB4) (22.6 percent) (p=0.46). Shimoni et al.
(2021) found that 5-year NRM was statistically highest among patients
who received MAC (34 percent) followed by those who received
fludarabine and GRAFAPEXTM (30 percent) and lowest among
those who received RIC (27 percent) (p=0.008). In Wedge et al. (2020),
3-year NRM was not statistically different (p=0.425) with a NRM of 13.6
percent for fludarabine/GRAFAPEXTM, 33.3 percent for
standard myeloablative (SMA) conditioning, and 17.9 percent for
nonmyeloablative (NMA) conditioning.
Third, the applicant claimed a significant reduction in several
clinically significant adverse events and complications that often lead
to treatment-related mortality (TRM), such as graft-versus-host disease
(GVHD), veno-occlusive disease (VOD), life-threatening infections, and
organ toxicities. However, some studies showed similar or higher rates
of adverse effects with the GRAFAPEXTM-based regimen.
Specifically, Fraccaroli et al. (2024) reported a similar frequency of
GVHD and renal failure, with no cases of VOD in either group and no
statistical comparison of infection rates presented. Per Beelen et al.
(2022), the frequencies of treatment-emergent adverse events and
serious adverse events were equally distributed between the study arms.
The incidence of acute GVHD and chronic GVHD was similar between
treatment groups or higher with the GRAFAPEXTM-based regimen
in Chichra et al. (2023), Bug et al. (2023), Gavriilaki et al. (2023),
and Pasic et al. (2024). In Shimoni et al. (2021), there was no
statistical difference in chronic GVHD among the treatment groups and
in Wedge et al. (2020), acute GVHD was similar between FluTreo and NMA.
We are inviting public comments on whether GRAFAPEXTM
meets the substantial clinical improvement criterion.
h. IMDELLTRATM (Tarlatamab-Dlle)
Amgen, Inc. submitted an application for new technology add-on
payments for IMDELLTRATM for FY 2026. According to the
applicant, IMDELLTRATM is a novel, first-in-class bispecific
T-cell engager (BiTE[supreg]) molecule for the treatment of adult
patients with extensive stage small cell lung cancer (ES-SCLC) with
disease progression on or after platinum-based chemotherapy. According
to the applicant, IMDELLTRATM works by binding to the delta-
like ligand 3 (DLL3) antigen expressed on the surface of SCLC tumor
cells and the cluster of differentiation 3 (CD3) co-receptor expressed
on the surface of T cells, causing T-cell activation, release of
inflammatory cytokines, and lysis of DLL3-expressing cells.
Please refer to the online application posting for
IMDELLTRATM, available at https://mearis.cms.gov/public/publications/ntap/NTP241007BQ3UB, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
IMDELLTRATM was granted accelerated approval of its BLA from
FDA on May 16, 2024, for the treatment of adult patients with ES-SCLC
with disease progression on or after platinum-based chemotherapy.
According to the applicant, IMDELLTRATM was commercially
available immediately after FDA approval. The applicant stated that the
first dose of IMDELLTRATM is 1 mg and all subsequent doses
are 10 mg, with all doses administered by a healthcare provider as a 1-
hour intravenous (IV) infusion. Per the applicant, the average
inpatient dose is 7.3 mg based on available data. The applicant noted
the only inpatient data available is for patients who experience
cytokine release syndrome (CRS) or immune effector cell-associated
neurotoxicity syndrome (ICANS) after IMDELLTRATM and it is
unknown how many patients without these adverse events would receive
IMDELLTRATM on an inpatient basis.
According to the applicant, there are currently no ICD-10-PCS
procedure codes to distinctly identify IMDELLTRATM. We note
that the applicant submitted a request for approval for unique ICD-10-
PCS procedure codes for IMDELLTRATM beginning in FY 2026.
The applicant provided a list of diagnosis codes that may be used to
currently identify the indication for IMDELLTRATM under the
ICD-10-CM coding system. Please refer to the online application posting
for the complete list of ICD-10-CM (and PCS) codes provided by the
applicant.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that IMDELLTRATM is not substantially similar to
other currently available technologies because it has a unique
mechanism of action as a BiTE[supreg] that simultaneously binds DLL3 on
SCLC cells and CD3 on T cells and because it is the only therapy
specifically studied and shown to improve outcomes for patients who are
relapsed or refractory to two or more other therapies and those with
treated, stable brain metastases, and that therefore, the technology
meets the newness criterion. The following table summarizes the
applicant's assertions regarding the substantial similarity criteria.
Please see the online application posting for IMDELLTRATM
for the applicant's complete statements in support of its assertion
that IMDELLTRATM is not substantially similar to other
currently available technologies.
[[Page 18124]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... IMDELLTRATM has a unique mechanism of action as the first and only
action to achieve a therapeutic outcome? approved BiTE[supreg] therapy targeting DLL3 across all patient
populations and as the only BiTE[supreg] therapy approved for
SCLC. IMDELLTRATM's mechanism of action involves simultaneously
binding the DLL3 antigen on a SCLC cell and the CD3 antigen on the
patient's own T cells. The binding of IMDELLTRATM results in the
formation of a synapse between T cells and DLL3-expressing cells,
including tumor cells, leading to T-cell activation causing the
release of inflammatory cytokines and lysis of DLL3-expressing
cells. Thus, IMDELLTRATM is unique as the only T-cell directed
immunotherapy approved for ES-SCLC. In contrast, other approved ES-
SCLC treatments are cytotoxic chemotherapies that work by
interfering with the ability of rapidly dividing cells to
replicate and divide, which can lead to cell death in both
cancerous and noncancerous cells. Lurbinectedin is an alkylating
drug that binds to DNA, forming adducts that perturb the cell
cycle and cause cell death in dividing cells. Topotecan and
irinotecan are topoisomerase-1 inhibitors that bind topoisomerase-
1-DNA complex and inhibit the repair of double-strand breaks in
DNA in dividing cells. IMDELLTRATM has a novel mechanism of action
targeting DLL3 for the treatment of ES-SCLC and is differentiated
from existing ES-SCLC treatments due to the uniqueness of both
this target and its tissue expression profile, which results in
activation of the T cell and lysis of DLL3-expressing SCLC cells.
Is the technology assigned to the same MS-DRG as existing Yes.................... The use of IMDELLTRATM to treat ES-SCLC is not expected to change
technologies? the MS-DRG assignment of the case.
Does new use of the technology involve the treatment of No..................... IMDELLTRATM does not involve the treatment of the same or similar
the same/similar type of disease and the same/similar type of disease or the same or similar patient population when
patient population when compared to an existing compared to existing technology because IMDELLTRATM is the first
technology? and only BiTE[supreg] therapy available for the treatment of
patients with ES-SCLC who have had disease progression on or after
platinum-based chemotherapy. Furthermore, although IMDELLTRATM is
indicated to treat patients after relapsing on first line (1L)
platinum-based chemotherapy, for the subset of these patients who
have become relapsed or refractory (R/R) to two or more therapies,
IMDELLTRATM is the only therapy that is approved by FDA and has
been specifically studied and demonstrated improvements in this
population. IMDELLTRATM also is the only FDA-approved second line
therapy (2L) that has been studied in SCLC patients with treated,
stable brain metastases.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We note that while the applicant asserted that
IMDELLTRATM does not involve the treatment of the same or
similar disease or patient population because it is the first
BiTE[supreg] therapy for patients with ES-SCLC who have had disease
progression on or after platinum-based chemotherapy, per the applicant,
other FDA-approved therapies for the treatment of the same patient
population (patients who have ES-SCLC with disease progression on or
after platinum-based chemotherapy) are currently available, such as
lurbinectedin and topotecan. Further, with respect to the applicant's
statements that IMDELLTRA[supreg] is the only FDA-approved therapy that
has been specifically studied and demonstrated improvements in the
subset of ES-SCLC patients who have become R/R to two or more therapies
or that have stable brain metastases, we believe that these assertions
may be relevant to substantial clinical improvement rather than newness
and these patients may still be treated with lurbinectedin or
topotecan. Therefore, we question the applicant's assertion that
IMDELLTRATM treats a unique patient population compared to
existing technology.
We are inviting public comments on whether IMDELLTRATM
is substantially similar to existing technologies and whether
IMDELLTRATM meets the newness criterion.
With respect to the cost criterion, the applicant provided two
analyses to demonstrate that IMDELLTRATM meets the cost
criterion. Each analysis followed the order of operations summarized in
the following table.
IMDELLTRATM Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes, ICD-10-PCS
codes, and MS-DRGs used by the applicant, see the cost criterion codes
and MS-DRGs attachment included in the online posting for IMDELLTRATM.
Claims identified...................... Scenario 1: 788 claims mapping to 16 MS-DRGs, with 43.02% of claims
mapping to MS-DRG 180 (Respiratory Neoplasms with MCC).
Scenario 2: 459 claims mapping to 5 MS-DRGs, with 73.86% of claims
mapping to MS-DRG 180 (Respiratory Neoplasms with MCC).
Charges removed for prior technology... The applicant removed 100% of charges associated with drugs and
cellular therapies to account for the chemotherapy agent IMDELLTRATM
will replace. The applicant noted there may be removed charges for non-
chemotherapy agents, but was conservative by removing 100% of the drug
and cellular therapy charges. The applicant did not remove indirect
charges related to the prior technology.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the standardization file posted with the FY 2025 IPPS/LTCH PPS final
rule and the impact file posted with FY 2023 IPPS/LTCH PPS final rule.
Inflation factor....................... The applicant applied an inflation factor of 12.9% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
[[Page 18125]]
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of a 10 mg dose of the new technology by the national average cost-to-
charge ratio of 0.178 for Drugs and Cellular Therapies from the FY
2025 IPPS/LTCH PPS final rule. Per the applicant, it repeated this
calculation for the 1 mg step up dose to confirm that, even if this
dose is administered in the inpatient setting, the final inflated
average case-weighted standardized charge per case exceeds the average
case-weighted threshold for the cost criterion.
The applicant did not add indirect charges related to the new
technology.
Cost analysis results.................. Scenario 1:
--Average case-weighted threshold amount: $102,317.
--Final inflated average case-weighted standardized charge per case:
$230,190.
Scenario 2:
--Average case-weighted threshold amount: $73,433.
--Final inflated average case-weighted standardized charge per case:
$203,476.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
both scenarios, the applicant asserted that IMDELLTRATM
meets the cost criterion.
We are inviting public comments on whether IMDELLTRATM
meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that IMDELLTRATM represents a substantial
clinical improvement over existing technologies because
IMDELLTRATM offers a treatment option for a patient
population unresponsive to, or ineligible for, currently available
treatments and the technology significantly improves clinical outcomes
relative to services or technologies previously available.
Specifically, per the applicant, IMDELLTRATM is a novel
treatment option that offers substantial clinical improvement through
deep and durable response for patients with ES-SCLC relapsed on
platinum-based chemotherapy. The applicant further stated that
IMDELLTRATM is the only approved DLL3-directed-CD3 T-cell
engager for the treatment of ES-SCLC, for which there is a profound
unmet need in this population who suffer from devastating outcomes and
suboptimal care from limited and ineffective treatment options. The
applicant provided four articles regarding outcomes from the phase I
DeLLphi-300 and phase II DeLLphi-301 trials and the
IMDELLTRATM prescribing information to support these claims,
as well as 16 background articles about SCLC and existing treatments
for the disease.\88\ The following table summarizes the applicant's
assertions regarding the substantial clinical improvement criterion.
Please see the online posting for IMDELLTRATM for the
applicant's complete statements regarding the substantial clinical
improvement criterion and the supporting evidence provided.
---------------------------------------------------------------------------
\88\ Background articles are not included in the following table
but can be accessed via the online posting for the technology.
------------------------------------------------------------------------
Supporting evidence provided by the
Applicant statements in support applicant
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a
treatment option for a patient population unresponsive to, or ineligible
for, currently available treatments
------------------------------------------------------------------------
The majority of ES-SCLC patients The applicant provided background
who are relapsed or refractory to information to support this claim,
1L treatment are, or become, which can be accessed via the
unresponsive to previously online posting for the technology.
approved 2L treatments.
There are limited treatment Ahn M, Cho B, et al. Tarlatamab for
options for ES-SCLC patients who Patients with Previously Treated
have relapsed, and IMDELLTRATM is Small-Cell Lung Cancer. N Eng J
a new option for SCLC patients Med. 2023;389:2063-75.
who have relapsed and are IMDELLTRATM (tarlatamab-dlle)
resistant to initial treatment injection, for intravenous use;
options. Amgen, Inc., 2024.
The applicant also provided
background information to support
this claim, which can be accessed
via the online posting for the
technology.
IMDELLTRATM is the first therapy Ahn, 2023, op. cit.
that has shown meaningful Sands J, Cho BC, et al. Tarlatamab
improvements in outcomes in the Sustained Clinical Benefit and
subset of patients who have Safety in Previously Treated SCLC:
failed two or more prior DeLLphi-301 Phase 2 Extended Follow-
therapies. up. Oral presentation (#OA10.03) at
2024 World Conference on Lung
Cancer in San Diego, California.
September 9, 2024.
Dingemans A, Ahn M, et al. DeLLphi-
301: Tarlatamab phase 2 trial in
small cell lung cancer (SCLC)--
Efficacy and safety analyzed by
presence of brain metastasis. J
Clin Oncology. 2024;42:8015.
Amgen, Inc., 2024, op. cit.
The applicant also provided
background information to support
this claim, which can be accessed
via the online posting for the
technology.
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology
significantly improves clinical outcomes relative to services or
technologies previously available
------------------------------------------------------------------------
Outcomes on existing therapies for The applicant provided background
ES-SCLC continue to be very poor, information to support this claim,
particularly as all previously which can be accessed via the
approved therapies have high online posting for the technology.
relapse rates.
[[Page 18126]]
IMDELLTRATM has shown substantial Sands, 2024, op. cit.
clinically meaningful improvement Ahn, 2023, op. cit.
in outcomes relative to other Amgen, Inc., 2024, op. cit.
available therapies for ES-SCLC The applicant also provided
patients. background information to support
this claim, which can be accessed
via the online posting for the
technology.
In ES-SCLC patients with stable Ahn, 2023, op. cit.
brain metastases pre-treated with Dingemans, 2024, op. cit.
two or more prior therapies, Amgen, Inc., 2024, op. cit.
IMDELLTRATM showed similar Dowlati A, Hummel H-D, et al.
clinical outcomes as patients Sustained Clinical Benefit and
without brain metastases in post- Intracranial Activity of Tarlatamab
hoc analysis. in Previously Treated Small Cell
Lung Cancer: DeLLphi-300 Trial
Update. J Clin Oncology. published
online August 29, 2024. doi:
10.1200/JCO.24.00553.
The applicant also provided
background information to support
this claim, which can be accessed
via the online posting for the
technology.
IMDELLTRATM has a generally Amgen, Inc., 2024, op. cit.
manageable safety profile and a Ahn, 2023, op. cit.
low incidence of treatment- The applicant also provided
related neutropenia. background information to support
this claim, which can be accessed
via the online posting for the
technology.
------------------------------------------------------------------------
We also received a public comment in response to the New Technology
Town Hall meeting notice published in the Federal Register regarding
the substantial clinical improvement criterion for
IMDELLTRATM, which we are summarizing in this section.
Comment: The applicant submitted a comment responding to questions
raised at the Town Hall meeting. In response to a question regarding
how the applicant controlled for differences in patient demographics
when comparing to other studies, the applicant stated there is reliable
information about patient demographics and outcomes in ES-SCLC patients
on currently available treatment supporting that IMDELLTRATM
is a substantial clinical improvement. The applicant referred to a
number of studies included in its application to support the statement.
First, the applicant noted that topotecan was evaluated in a
randomized, multicenter study of patients with SCLC who had relapsed at
least 60 days after completion of 1L therapy; patients with documented
brain metastases were included and represented 11.2 percent of the
topotecan arm of the study.\89\ The applicant also stated that
lurbinectedin was evaluated in a phase II single-arm, open-label basket
trial with SCLC patients who had previously failed on platinum-based
chemotherapy; the patient population had a median age of 60 years and
patients with brain metastases were excluded.\90\ Per the applicant,
while topotecan and lurbinectedin registrational trials did not study a
third line (3L) patient population, these therapies have been studied
in the real-world setting for U.S. patients since their FDA approvals
in 1996 and 2020, respectively, including analyses of real-world
overall survival (rwOS).91 92 93 The applicant further
stated that IMDELLTRATM was evaluated in a phase 2 multi-
cohort, open-label trial in patients R/R to one platinum-based
treatment and at least one other line of therapy, and were Eastern
Cooperative Oncology Group (ECOG) performance-status grade < 2. Per the
applicant, in this pre-treated population, approximately 33 percent of
patients had received 3 or more therapies; of the 99 patients treated
with IMDELLTRATM, 48 percent were 65 years of age or older
and 10 percent were 75 years of age or older.\94\ In addition, per the
applicant, there is a post-hoc analysis of the 23 percent of patients
with stable, treated brain metastases receiving the FDA-approved
dose.\95\
---------------------------------------------------------------------------
\89\ von Pawel J, Schiller J, et al. Topotecan Versus
Cyclophosphamide, Doxorubicin, and Vincristine for the Treatment of
Recurrent Small-Cell Lung Cancer. J Clin Oncology. 1999;17(2):658-
667.
\90\ Trigo J, Subbiah V, et al. Lurbinectedin as second-line
treatment for patients with small-cell lung cancer: a single-arm,
open-label, phase 2 basket trial. Lancet Oncol. 2020;21(5):645-654.
\91\ Borghaei H, Pundole X, Sangar[eacute] L, et al. Natural
history of SCLC patients treated in third-line and beyond: A
retrospective real world study. Lung Cancer. 2024;193:10781.
doi:10.1016/j.lungcan.2024.107819.
\92\ Coutinho AD, Shah M, Lunacsek OE, Eaddy M, & Willey JP.
Real-world treatment patterns and outcomes of patients with small
cell lung cancer progressing after 2 lines of therapy. Lung Cancer.
2019;127:53-58.
\93\ Desai A, Smith C, et al. Real-World Outcomes With
Lurbinectedin in Second-Line Setting and Beyond for Extensive Stage
Small Cell Lung Cancer. Clinical Lung Cancer. 2023;24(8):689-695.
\94\ Anh, 2023, op. cit.
\95\ Dingemans, 2024, op. cit.
---------------------------------------------------------------------------
With respect to a question regarding how the applicant compared
IMDELLTRATM's overall response rate (ORR) to other therapies
without data that shows the populations studied match, the applicant
stated that as previously noted, there is a significant amount of
clinical literature available regarding outcomes for ES-SCLC patients
on currently available treatment to support the applicant's claims of
substantial clinical improvement for IMDELLTRATM without the
need for head-to-head studies, which are not required as part of the
new technology add-on payment criteria. Further, the applicant noted
that tumor response (for example, ORR) is considered a direct measure
of drug antitumor activity, which can be adequately evaluated in a
single-arm study. Additionally, the applicant stated that overall
survival (OS) and progression-free survival (PFS) endpoints must be
interpreted with caution in single-arm trials and confirmatory phase
III trials are needed to confirm OS and PFS results.
The applicant stated that it is clear from currently available
literature that patients with ES-SCLC after failing on chemotherapy
have extremely poor outcomes on existing therapies, where response and
survival are measured in just a few months. The applicant again
referred to a number of studies included in its application to support
the statement. The applicant summarized the registrational trial
results for the other currently FDA-approved treatments for adult 2L
ES-SCLC patients and noted that topotecan demonstrated an ORR of 24.3
percent, a duration of response (DOR) of 3.3 months (14.4 weeks), a
median PFS (mPFS) of 3.1 months (13.3 weeks), and a median OS (mOS) of
5.8 months (25 weeks) in its pivotal trial (n=107).\96\ The applicant
stated lurbinectedin demonstrated an ORR of 35 percent, a DOR of 5.3
months, a mPFS of 3.5 months, and mOS of 9.3 months in its pivotal
trial (n=105). The applicant noted, however, that this clinical trial
data lacks evidence on patients with brain metastases per the trial's
exclusion criteria.\97\ In addition, the applicant
[[Page 18127]]
noted that lurbinectedin failed to reach its primary endpoint of OS in
the confirmatory phase 3 ATLANTIS trial.\98\ Further, the applicant
referenced the real-world analysis of U.S. patients in the 3L setting
by Borghaei et al. (2024), which found median rwOS was 5.3 months
(n=326; 95 percent CI, 4.5-6.0) following initiation of 3L therapies
(topotecan, lurbinectedin, immunotherapy, taxane monotherapy or
platinum-based chemotherapy with immunotherapy). The applicant stated
in addition that this analysis found the median time from SCLC
diagnosis to 3L therapy initiation was 400 days.
---------------------------------------------------------------------------
\96\ von Pawel, 1999, op. cit.
\97\ Trigo, 2020, op. cit.
\98\ Aix S, Ciuleanu T, et al. Combination lurbinectedin and
doxorubicin versus physician's choice of chemotherapy in patients
with relapsed small-cell lung cancer (ATLANTIS): a multicentre,
randomised, open-label, phase 3 trial. Lancet Respir Med.
2023;11:74-86.
---------------------------------------------------------------------------
Per the applicant, IMDELLTRATM had an ORR of 40 percent
and a mDOR of 9.7 months, with 43 percent of responses ongoing at data
cutoff in an extended follow-up analysis. In addition, the applicant
stated mOS was 15.2 months and was similar regardless of progression-
free interval (<90 days or 90+ days) after 1L platinum-based
chemotherapy (n=100).\99\ The applicant further stated that based on a
post-hoc analysis of the multi-cohort trial, efficacy outcomes were
also similar for patients with stable, treated brain metastases and
those without brain metastases.\100\ The applicant noted that Dingemans
et al. (2024) found stable, treated brain metastases patients in the
trial had an ORR of 54.5 percent, mPFS of 7.1 months, and mOS of 14.3
months. The applicant noted that IMDELLTRATM shows clinical
improvement by allowing patients to possibly live for more than 4 to 6
months following initiation of 2L treatment. The applicant also noted
that the American Society of Clinical Oncology (ASCO) recently came to
a similar conclusion independently, as per the updated ASCO guideline
on systemic therapy for SCLC submitted with respect to the substantial
clinical improvement criteria.\101\ The applicant stated ASCO had the
same information available to it with respect to outcomes on
lurbinectedin, topotecan, and IMDELLTRATM as that provided
by the applicant in its application, and updated ASCO guidelines stated
that the cross-trial comparisons suggest that both lurbinectedin and
IMDELLTRATM are more effective than topotecan or other
agents, although the DOR of >9 months reported with
IMDELLTRATM is substantially longer than that seen with
other agents.
---------------------------------------------------------------------------
\99\ Sands, 2024, op. cit.
\100\ Dingemans, 2024, op. cit.
\101\ Kalemkerian GP, Khurshid H, Ismaila N. Systemic Therapy
for Small Cell Lung Cancer: ASCO Guideline Rapid Recommendation
Update. JCO 0, JCO-24-02245.
---------------------------------------------------------------------------
In addition to the studies submitted by the applicant in its
application, the applicant noted that it has conducted an indirect
treatment comparison (ITC) to evaluate the relative benefit in survival
outcomes and response between IMDELLTRATM versus real-world
physicians' choice of therapy from a historical control cohort captured
in the U.S. Flatiron electronic health records database.\102\ The
applicant provided the ITC's research protocol as additional background
about how the ITC compared OS, PFS, and ORR,\103\ and indicated that
the study results are expected to be available in March 2025.
---------------------------------------------------------------------------
\102\ EMA, Real World Data Catalogues, Tarlatamab vs. Real-world
Physicians' Choice Therapies in Patients with Relapsed or Refractory
Small Cell Lung Cancer After Two or More Prior Lines of Treatment:
Patient-level Indirect Treatment Comparison (ITC) of DeLLphi-301 vs.
Flatiron Real-world Data; available at: https://catalogues.ema.europa.eu/node/4199/administrative-details. Accessed
December 13, 2024.
\103\ Per the applicant, the research protocol is available at
https://catalogues.ema.europa.eu/system/files/2024-10/20240049_tarlatamab_Protocol-Published%20Amendment.pdf.
---------------------------------------------------------------------------
Response: We thank the applicant for its comments. After review of
the information provided by the applicant and the public comment
received in response to the New Technology Town Hall meeting, we have
the following concerns regarding whether IMDELLTRATM meets
the substantial clinical improvement criterion. The applicant stated
that IMDELLTRATM offers a treatment option for patients with
2L+ ES-SCLC that are unresponsive to, or ineligible for, currently
available treatments, however it is unclear that these patients are
unresponsive or ineligible for existing 2L+ treatments for ES-SCLC,
such as lurbinectedin and topotecan. The applicant claimed that the
majority of ES-SCLC patients who are relapsed or refractory to 1L
treatment are or become unresponsive to previously approved 2L
treatments. For this claim, the applicant provided background articles
regarding treatment of ES-SCLC, but did not indicate a patient
population that IMDELLTRATM treats that is ineligible or
unresponsive to other 2L treatments. The applicant also claimed that
there are limited treatment options for ES-SCLC patients who have
relapsed and IMDELLTRATM is a new option for these patients.
However, we note that having limited treatment options does not
demonstrate that these patients are unresponsive or ineligible for any
available therapies. In addition, while the applicant provided results
from the pivotal DeLLphi-301 study of IMDELLTRATM stating
that it is the first therapy that has shown meaningful outcome
improvements in patients who have failed two or more prior therapies,
the study did not list these therapies, and we also note that
retreatment with platinum-based chemotherapy was considered an
additional line of therapy per the study. Therefore, it is unclear that
the study demonstrated that patients had failed existing 2L+
treatments, including lurbinectedin and topotecan. For these reasons,
we question the assertion that IMDELLTRATM offers a
treatment for a patient population unresponsive to, or ineligible for,
currently available treatments.
With respect to the applicant's statement that IMDELLTRA[supreg]
improves clinical outcomes over existing technologies because outcomes
on existing therapies for ES-SCLC continue to be very poor,
particularly as all previously approved therapies have high relapse
rates, and that, in the past 2 decades, relapsed ES-SCLC patients who
have failed platinum-based chemotherapy have had few treatment options
as only topotecan and lurbinectedin are FDA-approved and indicated for
these patients, we note that the applicant provided outcome data for
topotecan and lurbinectedin, in addition to highlighting that
lurbinectedin, pembrolizumab, and nivolumab failed to show a benefit in
OS in the confirmatory phase 3 clinical trials. However, the applicant
did not provide relapse rates for current therapies, including
IMDELLTRATM, and did not compare the provided outcome data
to IMDELLTRATM, and therefore we question how this
demonstrates that IMDELLTRATM improves clinical outcomes
relative to these therapies.
To support its other statements regarding improved outcomes for
IMDELLTRATM, the applicant provided results from DeLLphi-
301, a phase 2, single arm, open-label, international trial which
evaluated antitumor activity and safety of IMDELLTRATM in
patients with advanced SCLC previously treated with two or more lines
of therapy.\104\ However, we note that, of the 134 patients treated
with the target dose of IMDELLTRATM, only 14 were from North
America (without further specification on the country), and we question
whether differences in treatment guidelines between countries could
affect generalizability to the
[[Page 18128]]
Medicare population. We also note that 75 percent (101/134) of the
patients who took the approved dose of 10 mg in DeLLphi-301 had a
previous use of a programmed death ligand 1 (PD-L1) or programmed death
1 (PD-1) inhibitor,\105\ which are recommended as part of the initial
therapy for ES-SCLC, and we therefore question whether the results of
the DeLLphi-301 study were different between the group of patients who
previously received these therapies versus those who did not. We
further note that the applicant also provided the Sands et al. (2024)
presentation and the Dingemans et al. (2024) abstract which are
unpublished overviews that do not provide full details on the study
methods; therefore, we do not have sufficient information to evaluate
these studies.
---------------------------------------------------------------------------
\104\ Anh, 2023, op. cit.
\105\ Anh, 2023, op. cit.
---------------------------------------------------------------------------
With respect to the claim that IMDELLTRATM has shown
substantial clinically meaningful improvement in outcomes relative to
other available therapies for ES-SCLC patients, the applicant provided
outcomes for IMDELLTRATM from the DeLLphi-301 single arm,
phase 2 trial and compared them to outcomes from trials for other
approved treatments for patients who have relapsed on first-line
chemotherapy. The applicant stated that IMDELLTRATM,
lurbinectedin, and topotecan are FDA-approved and no treatments are
specifically FDA-approved for 3L treatment. The applicant stated
chemotherapy is a 3L treatment and has a mOS of 4.4 months, ORR of 21
percent, mDOR of 2.6 months, and mPFS of 2.3 months.\106\ The applicant
also noted that lurbinectedin can be used as a 3L agent, but mOS was
5.6 months according to real world data.\107\ The applicant also stated
IMDELLTRATM had an ORR of 40 percent, mDOR of 9.7 months,
mPFS of 4.9 months, and mOS of 14.3 months,\108\ with an mOS of 15.2
months after extended follow-up.\109\ The applicant further noted that
in a subgroup analysis of 22 patients with stable, treated brain
metastases, IMDELLTRATM showed similar outcomes with an ORR
of 54.5 percent, mPFS of 7.1 months, and mOS of 14.3 months.\110\ The
applicant stated the registrational study for topotecan included
patients with brain metastases and reported a mOS of only 5.8
months,\111\ while the pivotal phase II trial for lurbinectedin
excluded patients with brain metastases and in a real-world analysis
among 14 patients who received 3L therapy with lurbinectedin (11 of
which with CNS metastases), the mOS was 5.6 months.\112\ However, we
note that the applicant also stated in its Town Hall comment that tumor
response (for example, ORR) can be adequately evaluated in a single-arm
study, while OS and PFS endpoints must be interpreted with caution in
single-arm trials and confirmatory phase 3 trials are needed to confirm
OS and PFS results. Therefore, we question the applicant's use of OS
and PFS to support improved clinical outcomes with
IMDELLTRATM compared to previously available therapy.
Additionally, the applicant stated that the trial demonstrated mOS of
14.3 months for IMDELLTRATM,\113\ and compared it to
lurbinectedin's mOS of 5.6 months according to real world data,\114\
but we question whether it is appropriate to compare clinical trial and
real world data. We note, for example, that the phase 2 single arm
trial for lurbinectedin noted an OS of 9.3 months (Trigo et al.
(2020)), and we therefore question how the applicant chose the
historical control it used in these comparisons of outcomes. In
addition, the applicant noted that ORR can be evaluated in a single-arm
study and provides the ORR for IMDELLTRATM (40 percent in 3L
therapy \115\ and 54.5 percent in patients with stable brain metastases
\116\), but did not provide the ORR for topotecan or lurbinectedin in
patients with stable brain metastases, nor in patients that are taking
3L therapy. Therefore, we question the applicant's assertion of
improved clinical outcomes for IMDELLTRATM compared to
previously available therapy.
---------------------------------------------------------------------------
\106\ Coutinho, 2019, op. cit.
\107\ Desai, 2023, op. cit.
\108\ Ahn, 2023, op. cit.
\109\ Sands, 2024, op. cit.
\110\ Dingemans, 2024, op. cit.
\111\ von Pawel, 1999, op. cit.
\112\ Desai, 2023, op. cit.
\113\ Ahn, 2023, op. cit.
\114\ Desai, 2023, op. cit.
\115\ Ahn, 2023, op. cit.
\116\ Dingemans, 2024, op. cit.
---------------------------------------------------------------------------
We agree with the applicant that head-to-head trials, while
preferred, are not required for comparing currently available therapy.
However, we note that among the clinical trial and real-world data
provided for alternative therapies to IMDELLTRATM, there was
no control for confounding variables to ensure similar patients were
being compared to those who took IMDELLTRATM. Additionally,
we note that the real-world data provided for lurbinectedin as third
line therapy and the data for the subset of patients from DeLLphi-301
with brain metastases were small sample sizes of 14 and 22,
respectively, which may limit generalizability of these results to the
Medicare population as confounding variables could affect the results.
We note that exclusion of patients with brain metastases from the
pivotal phase 2 trial for lurbinectedin does not exclude use of this
drug in this patient population.
We further question the use of von Pawel et al. (1999) study of
topotecan as a comparator to IMDELLTRATM since it was
conducted approximately 25 years before the IMDELLTRATM
phase 2 trial (Ahn et al., 2023) and included some highly varied
patient outcomes (such as topotecan duration of responses ranging from
9.4-50.1 weeks). We note that guidelines and treatment protocols for
SCLC have evolved over this extended period and the resulting changes
in care standards may have impacted the outcomes observed from the
older study versus the more recent one.
In addition, the applicant stated that clinical trials of topotecan
and lurbinectedin reported higher rates of >= Grade 3 neutropenia than
reported in the DeLLphi-301 study with IMDELLTRATM
monotherapy, but did not consider other serious adverse events such as
cytokine release syndrome (CRS) or immune effector cell-associated
neurotoxicity syndrome (ICANS), which are possible side effects for
IMDELLTRATM but not for topotecan or lurbinectedin. We
further note that there was no control for potential confounding
variables in the patient populations in the comparisons of neutropenia
rates, and it is therefore difficult to draw conclusions regarding
relative side effect profiles among these different trials.
We are inviting public comments on whether IMDELLTRATM
meets the substantial clinical improvement criterion.
i. IntelliSep Test
Cytovale, Inc. submitted an application for new technology add-on
payments for the IntelliSep[supreg] Test for FY 2026. According to the
applicant, the IntelliSep[supreg] Test is a semi-quantitative test that
assesses cellular host response via a microfluidic deformability
cytometry of leukocyte biophysical properties and is intended for use
in conjunction with clinical assessments and laboratory findings to aid
in the early detection of sepsis with organ dysfunction for adults
presenting to the Emergency Department (ED). The IntelliSep[supreg]
Test generates an index value that falls within 1 of 3 discrete
interpretation bands based on the probability of sepsis with organ
dysfunction manifesting within the first 3 days after testing.
[[Page 18129]]
Please refer to the online application posting for the
IntelliSep[supreg] Test, available at https://mearis.cms.gov/public/publications/ntap/NTP24100553685, for additional detail describing the
technology and the disease diagnosed in part by the technology.
With respect to the newness criterion, according to the applicant,
the IntelliSep[supreg] Test was granted 510(k) clearance from FDA on
December 20, 2022, for use in adult patients with signs and symptoms of
infection who present to the ED. According to the applicant, the
IntelliSep[supreg] Test was commercially available immediately after
FDA marketing authorization. The applicant stated that one
IntelliSep[supreg] Test is used per patient per inpatient stay.
The applicant stated that, effective April 1, 2025, the following
ICD-10-PCS procedure code may be used to uniquely describe procedures
involving the use of the IntelliSep[supreg] Test: XXE5X5A (Measurement
of immune response, whole blood cellular assessment via microfluidic
deformability, new technology group 10). The applicant provided a list
of diagnosis codes that may be used to currently identify the
indication for the IntelliSep[supreg] Test using the ICD-10-CM coding
system. Please refer to the online application posting for the complete
list of ICD-10-CM codes provided by the applicant.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that the IntelliSep[supreg] Test is not substantially similar
to other currently available technologies because the
IntelliSep[supreg] Test is the only FDA-cleared test that uses a
microfluidic deformability cytometry technique for early detection of
sepsis in the ED regardless of whether the patient is admitted to the
hospital or not and that therefore, the technology meets the newness
criterion. The following table summarizes the applicant's assertions
regarding the substantial similarity criteria. Please see the online
application posting for the IntelliSep[supreg] Test for the applicant's
complete statements in support of its assertion that the
IntelliSep[supreg] Test is not substantially similar to other currently
available technologies.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... The IntelliSep[supreg] Test is the only test that uses a
action to achieve a therapeutic outcome? microfluidic deformability cytometry technique to measure the
biophysical properties of thousands of individual leukocytes in
rapid succession. These properties have been shown to differ in
quiescent white blood cell populations when compared to those in
septic patients, enabling for rapid assessment of the host
response and the likelihood of having or developing sepsis. Other
tests for sepsis exist, but these tests measure biomarker levels
or gene expression to generate their signal.
Is the technology assigned to the same MS-DRG as existing Yes.................... The use of any test to detect the presence of sepsis does not
technologies? impact the MS-DRG assignment of the discharge.
Does new use of the technology involve the treatment of No..................... While other tests can be used to detect the presence of sepsis, the
the same/similar type of disease and the same/similar IntelliSep[supreg] Test is the first and only FDA-cleared test for
patient population when compared to an existing early detection of sepsis with organ dysfunction in adult patients
technology? with signs and symptoms of infection who present to the ED,
regardless of whether the patient is admitted to the hospital or
not. Other tests indicated for early detection of sepsis can only
be administered after the patient has been admitted to the
hospital.
--------------------------------------------------------------------------------------------------------------------------------------------------------
With respect to the substantial similarity criteria, we note the
following concerns. We note that the applicant did not compare the
IntelliSep[supreg] Test's mechanism of action to those of other sepsis
tests or detection tools, such as the Early Sepsis Indicator for
monocyte distribution width (MDW), SeptiCyte[supreg] RAPID, and Sepsis
ImmunoScoreTM. We further note that MDW measurement involves
the assessment of white blood cells to detect pathogen-induced
infections. Specifically, MDW measures the variability in peripheral
monocyte morphologic characteristics that increase during early phases
of infection after pathogen-induced monocyte activation.\117\ Notably,
monocytes (measured for MDW) are one type of leukocyte, and the
IntelliSep[supreg] Test also evaluates leukocytes in its mechanism of
action.\118\ While the techniques of leukocyte measurement may differ,
the subject of measurement appears to be the same or similar.
Therefore, we question whether the IntelliSep[supreg] Test's
measurement of leukocytes and their deformities is a unique mechanism
of action, particularly in comparison to the Early Sepsis Indicator.
Further, we question whether the measurement of different biomarkers or
gene expression to determine the risk of sepsis is different than the
measurement of leukocyte properties to determine the risk of sepsis. We
are interested in information regarding how the IntelliSep[supreg]
Test's mechanism of action differs from other such sepsis tests and
detection tools.
---------------------------------------------------------------------------
\117\ Malinovska, A., Hernried, B., Lin, A., Badaki-Makun, O.,
Fenstermacher, K., Ervin, A.M., Ehrhardt, S., Levin, S., & Hinson,
J.S. (2023). Monocyte Distribution Width as a Diagnostic Marker for
Infection: A Systematic Review and Meta-analysis. Chest, 164(1),
101-113. https://doi.org/10.1016/j.chest.2022.12.049.
\118\ U.S. Food and Drug Administration. (2022). 510(k) approval
letter for IntelliSep Test, 21 CFR 866.3215, device to detect and
measure non-microbial analyte(s) in human clinical specimens to aid
in assessment of patients with suspected sepsis. https://www.accessdata.fda.gov/cdrh_docs/pdf22/K220991.pdf.
---------------------------------------------------------------------------
In addition, while the applicant stated that the use of the
IntelliSep[supreg] Test does not involve treatment of the same or
similar population and disease as existing technologies, we note that
the IntelliSep[supreg] Test is a diagnostic tool to evaluate patients
with suspected infection, as are other FDA-cleared sepsis diagnostic
tools, such as those that calculate Quick Sequential Organ Failure
Assessment (qSOFA) scores (for example, SpassageQ \119\ or NAVOY
CDS[supreg] \120\). Furthermore, there are also other means of
assessment, including body temperature, respiratory rate, heart rate,
blood counts, and blood cultures, that are used to diagnosis sepsis. We
also question whether a patient's location, whether in the ED, admitted
to the hospital, or in the intensive care
[[Page 18130]]
unit (ICU) constitutes a different population. Further, we note that
there are existing sepsis diagnostic technologies that are also
approved for use in the ED such as the Early Sepsis Indicator and
Sepsis ImmunoScoreTM, which were FDA market-authorized on
March 18, 2019 and April 2, 2024, respectively.121 122
Therefore, it is unclear that there are no existing technologies other
than the IntelliSep[supreg] Test that are involved with the diagnosis
of sepsis in adult patients who have signs and symptoms of infection.
---------------------------------------------------------------------------
\119\ https://www.accessdata.fda.gov/cdrh_docs/pdf23/K230386.pdf.
\120\ https://www.accessdata.fda.gov/cdrh_docs/pdf24/K240558.pdf.
\121\ https://www.accessdata.fda.gov/scrIpts/cdrh/cfdocs/cfpmn/pmn.cfm?id=K181599.
\122\ https://www.accessdata.fda.gov/cdrh_docs/pdf23/DEN230036.pdf.
---------------------------------------------------------------------------
We are inviting public comments on whether the IntelliSep[supreg]
Test is substantially similar to existing technologies and whether the
IntelliSep[supreg] Test meets the newness criterion.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that the IntelliSep[supreg] Test meets the cost
criterion. The analysis followed the order of operations summarized in
the following table.
IntelliSep[supreg] Test Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes and MS-DRGs
used by the applicant, see the cost criterion codes and MS-DRGs
attachment included in the online posting for the IntelliSep[supreg]
Test.
Claims identified...................... 2,708,804 claims mapping to 717 MS-DRGs, with 18.86% of claims mapping
to MS-DRG 871 (Septicemia or Severe Sepsis without MV >96 Hours with
MCC).
Charges removed for prior technology... Per the applicant, the IntelliSep[supreg] Test is not replacing a prior
technology as it provides additional information to the clinician to
determine if the patient has sepsis. As such, the applicant did not
remove any estimated charges for a prior technology. The applicant
stated that 25% of charges associated with Room and Board (revenue
centers 011X-015X) and ICU/CCU (021X, 022X) were removed as the use of
this technology can reduce average length of stay.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2023 IPPS/LTCH PPS final rule
correcting amendment.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of the new technology by the national average cost-to-charge ratio of
0.102 for Laboratory from the FY 2025 IPPS/LTCH PPS final rule. The
applicant did not add indirect charges related to the new technology.
Cost analysis results.................. Average case-weighted threshold amount: $75,886.
Final inflated average case-weighted standardized charge per case:
$86,075.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant asserted that the IntelliSep[supreg] Test meets the cost
criterion.
We are inviting public comments on whether the IntelliSep[supreg]
Test meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that the IntelliSep[supreg] Test represents a
substantial clinical improvement over existing technologies because the
IntelliSep[supreg] Test is the only technology that is FDA-cleared for
use in the ED to rapidly assess immune activation and identify sepsis
risk in approximately 10 minutes, providing actionable results that
significantly impact clinical decision-making and patient outcomes. The
applicant provided 9 studies to support these claims,\123\ as well as
19 background articles about international sepsis guidelines,
antimicrobial therapy initiation, timing of antibiotic administration,
and other topics related to sepsis detection. We note that two other
articles were submitted as supporting evidence (Kraus et al., 2023;
Rhee et al., 2017), which we believe should be characterized as
background articles because they do not directly assess the use of the
IntelliSep[supreg] Test.\124\ Instead, Kraus et al. (2023) focused on
evaluating key attributes of rapid host response sepsis tests via an
expert review panel, and Rhee et al. (2017) estimated the U.S.
incidence of sepsis and sepsis trends using electronic health records.
The following table summarizes the applicant's assertions regarding the
substantial clinical improvement criterion. Please see the online
posting for the IntelliSep[supreg] Test for the applicant's complete
statements regarding the substantial clinical improvement criterion and
the supporting evidence provided.
---------------------------------------------------------------------------
\123\ One of these studies (Sheybani et al., 2024) is a
published abstract that was retracted.
\124\ Kraus, C.K., Nguyen, H.B., Jacobsen, R.C., Ledeboer, N.A.,
May, L.S., O'Neal, H.R., Jr., Puskarich, M.A., Rice, T.W., Self,
W.H., & Rothman, R.E. (2023). Rapid identification of sepsis in the
emergency department. Journal of the American College of Emergency
Physicians Open, 4, e12984. https://doi.org/10.1002/emp2.12984.
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers the ability to diagnose a medical condition
in a patient population where that medical condition is currently undetectable or offers the ability to diagnose
a medical condition earlier in a patient population than allowed by currently available methods.
----------------------------------------------------------------------------------------------------------------
IntelliSep[supreg] Test assists Sheybani, Roya, Matt Sorrells, Daniel Henning, et al. ``Evaluation of a
physicians in identifying patients cellular host response test in sepsis diagnosis and risk-
where sepsis is unlikely, allowing for stratification in emergency patients with hemodynamic or
the more rapid pursuit of alternate cardiopulmonary instability'' CHEST 166, no. 4 (October 1, 2024):
diagnoses. A2163-64. https://doi.org/10.1016/j.chest.2024.06.1335
O'Neal HR Jr., et al. Cellular host response sepsis test for risk
stratification of patients in the emergency department: a pooled
analysis. Acad Emerg Med. 2024a.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
[[Page 18131]]
IntelliSep[supreg] Test allows O'Neal, 2024a, op. cit.
clinicians to make early, appropriate Thomas CB, Hollis AK, Sorrells MG, et al. Evaluation of early-stage
antibiotic decisions in patients with implementation results of a cellular host-response test in an
suspected sepsis while pursuing emergency department setting. Presented at ECCMID 2024a.
antimicrobial stewardship targets. The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
IntelliSep[supreg] Test provides Jagneaux T, Grantham A, Richard K, et al. Novel Diagnostic for Patients
clinicians with actionable results Presenting to the ED with Possible Infection. Association for
sooner than pathogen-based detection Diagnostics & Laboratory Medicine Conference. July 31, 2024.
systems. O'Neal, 2024a, op. cit.
O'Neal HR Jr, Sheybani R, Janz DR, et al. Validation of a Novel, Rapid
Sepsis Diagnostic for Emergency Department Use. Crit Care Explor.
2024b;6(2):e1026. Published 2024b Feb 7. doi:10.1097/
CCE.0000000000001026.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
IntelliSep[supreg] Test outperforms O'Neal, 2024a, op. cit.
current sepsis diagnostic tools The applicant also provided background information to support this
available for use in the Emergency claim, which can be accessed via the online posting for the
Department. technology.
IntelliSep[supreg] Test effectively O'Neal, 2024a, op. cit.
differentiates sepsis from non- The applicant also provided background information to support this
specific biomarker elevations in claim, which can be accessed via the online posting for the
various clinical conditions. technology.
Sepsis is a dysregulated response to Guillou L, Sheybani R, Jensen AE, et al. Development and validation of
infection. IntelliSep[supreg] Test is a cellular host response test as an early diagnostic for sepsis. PLoS
the only FDA-cleared test to assess One. 2021;16(4):e0246980. Published 2021 Apr 15. doi:10.1371/
immune response in patients presenting journal.pone.0246980.
to the ED. O'Neal, 2024a, op. cit.
Sorrells MG, Seo Y, Magnen M, et al. Biophysical Changes of Leukocyte
Activation (and NETosis) in the Cellular Host Response to Sepsis.
Diagnostics. 2023;13:1435. doi:10.3390/diagnostics13081435.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
IntelliSep[supreg] Test reduces door to Jagneaux, 2024, op. cit.
bedtime for patients presenting with The applicant also provided background information to support this
Occult sepsis who appear clinically claim, which can be accessed via the online posting for the
stable by triage staff. technology.
IntelliSep[supreg] Test identifies
high-risk patients earlier, even when
they appear clinically stable.
IntelliSep[supreg] Test results enable O'Neal, 2024a, op. cit.
ED providers to decrease use of Thomas, 2024a, op. cit.
diagnostic images and testing, The applicant also provided background information to support this
resulting in decreased exposure and claim, which can be accessed via the online posting for the
associated risks. technology.
IntelliSep[supreg] Test's rapid Jagneaux, 2024, op. cit.
turnaround time allows for prompt Thomas C, Richard K, Grantham A, et al. Evaluation of early stage
attention to infection source implementation results of a cellular host-response test in decreasing
identification and control. sepsis mortality for patients presenting to the ED. Presented at:
Society of Critical Care Medicine (SCCM) Annual Congress; February 23-
25, 2025; Orlando, Florida, USA.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
IntelliSep[supreg] Test aids in O'Neal, 2024a, op. cit.
reducing risk of mortality amongst Jagneaux, 2024, op. cit.
tested patients. Thomas, 2025, op. cit.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
IntelliSep[supreg] Test aids in O'Neal, 2024a, op. cit.
reducing average length of stay (LOS) Jagneaux, 2024, op. cit.
amongst tested patients. Thomas CB, Hollis A, Teague L, et al. The fiscal impact of a rapid
sepsis diagnostic in the Emergency Department (ED). Presented at: 44th
International Symposium on Intensive Care and Emergency Medicine
(ISICEM); 2024b; Brussels, Belgium.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
IntelliSep[supreg] Test aids improved O'Neal, 2024a, op. cit.
compliance with the CMS SEP-1 and Jagneaux, 2024, op. cit.
Surviving Sepsis Campaign 3-hour The applicant also provided background information to support this
bundle compliance. claim, which can be accessed via the online posting for the
technology.
IntelliSep[supreg] Test aids sepsis O'Neal, 2024a, op. cit.
antibiotic initiation consistent with Jagneaux, 2024, op. cit.
current consensus guidelines. The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
----------------------------------------------------------------------------------------------------------------
[[Page 18132]]
We also received a public comment in response to the New Technology
Town Hall meeting notice published in the Federal Register regarding
the substantial clinical improvement criterion for the
IntelliSep[supreg] Test, which we summarize in this section.
Comment: The applicant submitted a public comment in response to
questions asked at the Town Hall regarding the comparison of the
IntelliSep[supreg] Test to other sepsis tests, namely to technology
that assesses MDW and SeptiCyte[supreg] RAPID. The applicant submitted
an additional study (Sarani et al., 2024), which concluded that the
IntelliSep[supreg] Test, along with von Willebrand factor (vWF)/
ADAMTS13 ratios, may be useful and appear to be superior to the
traditional marker, MDW, for the early diagnosis of sepsis in patients
visiting the ED.\125\ This 2024 study investigated the use of the
IntelliSep[supreg] Test, MDW, and other biomarkers to diagnose sepsis
in 44 patients (25 patients with a low probability of sepsis and 19
patients with a high probability of sepsis) who visited the ED at The
University of Kansas Medical Center. The applicant noted that MDW is
not widely used as a screening tool in the ED, which is where the
IntelliSep[supreg] Test is indicated for use. Regarding comparison of
the IntelliSep[supreg] Test to SeptiCyte[supreg] RAPID, the applicant
stated that it believes a comparison between the two sepsis diagnostic
tests is inappropriate given the differences in indicated uses for the
tests, primarily the indicated location; IntelliSep[supreg] Test is
indicated for use in the ED prior to the provider's decision to admit
the patient, whereas SeptiCyte[supreg] RAPID is used first day post-
admission to the ICU. The applicant cited a recent study that found
only 16.1 percent of patients tested with the IntelliSep[supreg] Test
are admitted to the ICU.\126\
---------------------------------------------------------------------------
\125\ Sarani, N., Dasgupta, A., Enders, M., Rowan, L., Elsarraj,
H., Gralnek, S., Shay, M., Lemar, L.R., Simpson, S.Q., Cunningham,
M.T., & Zheng, X.L. (2024). Clinical Utility of Recently Food and
Drug Administration-Approved IntelliSep[supreg] Test (Sepsis
Biomarker) for Early Diagnosis of Sepsis: Comparison with Other
Biomarkers. Journal of Clinical Medicine, 13(16), 4852. https://doi.org/10.3390/jcm13164852.
\126\ O'Neal, H.R., Jr, Sheybani, R., Kraus, C.K., Self, W.H.,
Shah, A.M., Thomas, C.B., Tse, H.T.K., & Scoggins, R. (2024b).
Cellular host response sepsis test for risk stratification of
patients in the emergency department: A pooled analysis. Academic
Emergency Medicine, 31(9), 883-893. https://doi.org/10.1111/acem.14923.
---------------------------------------------------------------------------
Response: We thank the applicant for its comments. After review of
the information provided by the applicant and the public comment
received in response to the New Technology Town Hall meeting, we have
the following concerns regarding whether the IntelliSep[supreg] Test
meets the substantial clinical improvement criterion. Regarding the new
study provided by the applicant in the Town Hall comment, we note that
Sarani et al. (2024) does not compare the IntelliSep[supreg] Test and
MDW with respect to the ability to diagnose sepsis earlier or resulting
clinical outcomes (for example, length of stay or mortality).
The applicant made six claims in regard to the substantial clinical
improvement assertion that the IntelliSep[supreg] Test offers the
ability to diagnose sepsis in a patient population where the condition
is currently undetectable or offers the ability to diagnose sepsis
earlier in a patient population than allowed by currently available
methods; however, we note that a number of these claims did not address
this criterion. Specifically, the applicant stated that the
IntelliSep[supreg] Test (1) allows clinicians to make early,
appropriate antibiotic decisions in patients with suspected sepsis
while pursuing antimicrobial stewardship targets; (2) outperforms
current sepsis diagnostic tools available for use in the ED; (3)
effectively differentiates sepsis from non-specific biomarker
elevations in various clinical conditions; (4) is the only FDA-cleared
test to assess dysregulated immune response to infection (sepsis) in
patients presenting to the ED; and (5) has demonstrated a high NPV for
sepsis and therefore allows for it to be ruled out where sepsis is
unlikely. These claims discuss the reliability of the
IntelliSep[supreg] Test outcomes or the potential benefits of sepsis
risk stratification, or relate to not diagnosing sepsis, and do not
address the ability of the IntelliSep[supreg] Test to diagnose a
patient population where sepsis is currently undetectable or offer the
ability to diagnose sepsis earlier than other technologies.
We further note that none of the claims made by the applicant under
this assertion provided a comparison of time to diagnosis to currently
available sepsis diagnostics in order to demonstrate that the
IntelliSep[supreg] Test can diagnose sepsis earlier than currently
available methods. While the applicant provided O'Neal et al. (2024b),
which established the 7.2 minute testing turnaround time for the
IntelliSep[supreg] Test to support the claim that it provides
clinicians with actionable results sooner than pathogen-based detection
systems, the only other testing time provided as a comparison was from
a study comparing time to positivity between the BacT/Alert and BACTEC
blood culture systems (Butler-Laporte et al., 2020). We would
appreciate evidence comparing time to diagnosis for the
IntelliSep[supreg] Test and other existing sepsis detection tools also
developed to address the length of time to definite sepsis diagnosis
with blood cultures, such as Early Sepsis Indicator or Sepsis
ImmunoScore, in order to demonstrate the applicant's assertion that the
IntelliSep[supreg] Test allows for faster detection of sepsis compared
to existing technologies.
We further note that we did not receive any information
demonstrating that clinicians changed the management of patients due to
the use of the IntelliSep[supreg] Test. The Jagneaux et al. (2024)
study measured time-to-bed assignment (TTB) when nurses at one medical
center triaged patients in the ED waiting room, tested patients using
the IntelliSep[supreg] Test, and placed patients with
IntelliSep[supreg] Band 3 results in ED beds. The study showed that TTB
for Band 3 was shorter than TTB for Band 1, but we question whether TTB
between risk-stratified bands should be considered a change in
management. The study did not include a control group or comparison to
other sepsis tests or diagnostic tools to demonstrate differences in
patient management between the use of the IntelliSep[supreg] Test and
other standards of care. We further note that Jagneaux et al. (2024),
which is an unpublished abstract, lacked details regarding the patient
population, study protocol, and statistical analyses, and is only
representative of a single medical center. We are therefore unclear
whether the results may be influenced by potential confounding factors,
and we question whether they are generalizable to other EDs or
geographic regions as well as to the Medicare population.
The applicant also made seven claims in regard to the substantial
clinical improvement assertion that the IntelliSep[supreg] Test
significantly improves clinical outcomes relative to services or
technologies previously available. However, we note that a number of
these claims do not address this criterion. In particular, the
applicant stated that the IntelliSep[supreg] Test (1) reduces door-to-
bed time for patients presenting with occult sepsis who appear
clinically stable by triage staff; (2) allows for prompt attention to
infection source identification and control through its rapid
turnaround time; (3) aids improved compliance with the CMS SEP-1 and
Surviving Sepsis Campaign 3-hour bundle compliance; and (4) aids sepsis
antibiotic initiation consistent with current consensus guidelines.
First, we question whether the claim that the IntelliSep[supreg] Test
reduces door-to-bed time is an appropriate proxy for timely
[[Page 18133]]
antibiotic administration and the potential for subsequent clinical
outcomes (such as mortality). The strength of the direct association
between time from door-to-bed and clinical outcome improvement or
whether any outcomes are inferred from surrogate endpoints is unclear.
We also note that the provided evidence does not demonstrate whether
the IntelliSep[supreg] Test is the driving factor, among all other
tests and clinical practices, that allows timely infection source
identification and control and, therefore, decreases mortality.
Additionally, we are unclear about the direct association between the
IntelliSep[supreg] Test and antibiotic initiation for sepsis consistent
with current guidelines as this is also only inferred, and the
IntelliSep[supreg] Test is one tool among others used to diagnose
sepsis. We also question whether compliance with the CMS SEP-1 and
Surviving Sepsis Campaign 3-hour bundles is intended as a proxy for
decreased mortality that may occur from reducing the time to antibiotic
administration. We note that a decrease in mortality is only inferred,
and the provided evidence does not demonstrate that the
IntelliSep[supreg] Test decreases mortality. We are unclear how these
claims relate to a demonstration of substantial clinical improvement
over existing technologies because these claims do not pertain to
clinical outcomes described at Sec. 412.87(b)(1)(ii)(C), such as a
reduction in mortality or a decreased rate of at least one subsequent
diagnostic or therapeutic intervention.
We also note that the claims and the provided evidence regarding
the IntelliSep[supreg] Test's ability to significantly improve clinical
outcomes relative to services or technologies previously available lack
a comparison of the IntelliSep[supreg] Test to existing technologies
used to diagnose sepsis, such as the previously discussed Early Sepsis
Indicator, SeptiCyte[supreg] RAPID, and Sepsis ImmunoScore\TM\. While
the applicant stated in its Town Hall comment that a comparison between
the IntelliSep[supreg] Test and SeptiCyte[supreg] RAPID is
inappropriate due to the differences in indicated location, we question
whether the impact of testing different patients in different
environments within a hospital would be relevant to clinical outcomes
such as timely antibiotic administration and mortality. In addition, we
note that both Early Sepsis Indicator and Sepsis ImmunoScore\TM\ are
indicated for use in the ED. We are interested in comparative evidence
for other sepsis diagnostic technologies in order to evaluate the
IntelliSep[supreg] Test's clinical outcomes relative to other
technologies. We also note that since much of the evidence provided
across claims (Thomas et al. (2025); Thomas et al. (2024a); Thomas et
al. (2024b)) is unpublished, the details provided do not include study
protocols or statistical methods and measures. As such, we are unable
to account for differences in the outcome measures or determine if the
results are statistically significant. Further, because these study
results are from one academic medical center, we question whether the
results are generalizable to other hospitals and more broadly to the
Medicare population. Where the Jagneaux et al. (2024) study was used to
support claims regarding the IntelliSep[supreg] Test's ability to
significantly improve clinical outcomes relative to services or
technologies previously available, we also have the same concerns as
previously discussed, including lack of details regarding the patient
population, study protocol, and statistical analyses.
In addition, with respect to the claim that IntelliSep[supreg] Test
results enable ED providers to decrease the use of diagnostic images
and testing, resulting in decreased exposure and associated risks,
while Thomas et al. (2024a) evaluated the impact of the
IntelliSep[supreg] Test on blood culture orders, antibiotic usage, and
patients' LOS for 1,275 patients who presented to an ED with signs or
symptoms of infection, we note that the study did not determine whether
a decrease in these measures resulted in patients experiencing
decreased exposure and associated risks or a significant improvement in
clinical outcomes relative to technologies previously available.
While the Jagneaux et al. (2024) study provided by the applicant
did not measure mortality, the applicant provided the O'Neal, et al.
(2024a) study, which did measure all-cause cumulative hospital
mortality stratified by IntelliSep[supreg] bands; however, the study
only compared the IntelliSep[supreg] Test to common traditional sepsis
tests or detection tools, such as white blood cell count,
procalcitonin, lactate, blood cultures, and the Sequential Organ
Failure Assessment (SOFA). O'Neal et al. (2024a) did not provide
hospital mortality data to demonstrate the IntelliSep[supreg] Test
improved clinical outcomes relative to other technologies that are
available, such as Early Sepsis Indicator, SeptiCyte[supreg] RAPID, and
Sepsis ImmunoScore\TM\.
Regarding the claim that the IntelliSep[supreg] Test aids in
reducing average LOS among tested patients, the Thomas et al. (2024b)
study submitted by the applicant found that incorporating the
IntelliSep[supreg] Test and releasing its results to clinicians for 413
patients of a large U.S. academic medical center led to a reduction of
1.28 days for inpatients and 2.42 days for ICU patients, when compared
to 196 patients in the control group for which the IntelliSep[supreg]
Test was performed but not released to clinicians. We note that the
study used control and intervention cohorts that were not concurrent,
and we question the impact from varying confounders, such as changes in
clinical policy. We note that the applicant also included background
studies to demonstrate a positive association between longer hospital
LOS and the probability of acquiring an infection, readmission,
negative emotions, and increased hospital costs.\127\ However, these
studies did not assess the IntelliSep[supreg] Test's ability to affect
LOS, rates of infection, readmission, or other clinical outcomes.
---------------------------------------------------------------------------
\127\ Hassan, M., Tuckman, H.P., Patrick, R.H., Kountz, D.S., &
Kohn, J.L. (2010). Hospital length of stay and probability of
acquiring infection. International Journal of Pharmaceutical and
Healthcare Marketing, 4(4), 324-338. https://doi.org/10.1108/17506121011095182.
---------------------------------------------------------------------------
Lastly, we question how much capability should be attributed to the
IntelliSep[supreg] Test when making clinical judgments and improving
clinical outcomes, and we welcome additional information.
We are inviting public comments on whether the IntelliSep[supreg]
Test meets the substantial clinical improvement criterion.
j. Neuroguard IEP[supreg] 3-in-1 Carotid Stent and Post-Dilation
Balloon System With Integrated Embolic Protection
Contego Medical, Inc. submitted an application for new technology
add-on payments for the Neuroguard IEP[supreg] 3-in-1 Carotid Stent and
Post-Dilation Balloon System with Integrated Embolic Protection
(Neuroguard IEP[supreg] System) for FY 2026. According to the
applicant, the Neuroguard IEP[supreg] System combines a carotid stent
with an integrated 40 [mu]m embolic protection filter and post-dilation
balloon. Per the applicant, the Neuroguard IEP[supreg] System restores
and maintains vessel patency while stabilizing plaque, and by capturing
small emboli during critical phases, it reduces the risk of stroke
during the procedure and helps prevent future stroke.
Please refer to the online application posting for the Neuroguard
IEP[supreg] System, available at https://mearis.cms.gov/public/publications/ntap/NTP241004CNKB9, for additional detail describing the
technology and carotid artery disease.
[[Page 18134]]
With respect to the newness criterion, according to the applicant,
the Neuroguard IEP[supreg] System was granted premarket approval (PMA)
from FDA on October 11, 2024 for improving the carotid luminal diameter
in subjects at high risk for adverse events from a carotid
endarterectomy who require carotid revascularization and meet the
criteria outlined below: patients with symptomatic stenosis of the
common or internal carotid artery with >=50 percent as determined by
angiography using North American Symptomatic Carotid Endarterectomy
Trial (NASCET) methodology or patients with asymptomatic stenosis of
the common or internal carotid artery with >=80 percent as determined
by angiography using NASCET methodology; and patients with reference
vessel diameters 4.0 mm to 8.0 mm. The applicant and FDA approval
letter stated that this technology is also indicated for post-dilation
of the stent component with simultaneous capture and removal of embolic
material. According to the applicant, the Neuroguard IEP[supreg] System
is used in conjunction with an available primary distal embolic
protection device as described in the Instructions for Use. According
to the applicant, the Neuroguard IEP[supreg] System was commercially
available immediately after its FDA approval. Per the applicant, one
Neuroguard IEP[supreg] System typically is used per inpatient stay.
According to the applicant, there are currently no ICD-10-PCS
procedure codes to distinctly identify the Neuroguard IEP[supreg]
System. We note that the applicant submitted a request for approval for
a unique ICD-10-PCS procedure code for the Neuroguard IEP[supreg]
System beginning in FY 2026. The applicant stated that codes I65.21
(Occlusion and stenosis of right carotid artery), I65.22 (Occlusion and
stenosis of left carotid artery), I65.23 (Occlusion and stenosis of
bilateral carotid arteries), or I65.29 (Occlusion and stenosis of
unspecified carotid artery) may be used to currently identify the
indication for the Neuroguard IEP[supreg] System under the ICD-10-CM
coding system.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that the Neuroguard IEP[supreg] System is not substantially
similar to other currently available technologies because it is a
first-in-class, novel device that uses a different mechanism of action
compared to existing technologies by integrating a stent with a 40
[mu]m (3 to 4 times smaller than pores of traditional filters) embolic
protection filter and a post-dilation balloon, aiming to streamline the
procedure and increase the effectiveness of embolic protection during
carotid stenting, and that no other similar device is currently
available in the U.S., and therefore, the technology meets the newness
criterion. The following table summarizes the applicant's assertions
regarding the substantial similarity criteria. Please see the online
application posting for the Neuroguard IEP[supreg] System for the
applicant's complete statements in support of its assertion that the
Neuroguard IEP[supreg] System is not substantially similar to other
currently available technologies.
----------------------------------------------------------------------------------------------------------------
Applicant
Substantial similarity criteria response Applicant assertions regarding this criterion
----------------------------------------------------------------------------------------------------------------
Does the technology use the same No............. Multiple clinical studies have reported that the majority of
or similar mechanism of action debris released during carotid stenting is less than 100
to achieve a therapeutic microns ([mu]m). The Neuroguard IEP[supreg] System features
outcome? an innovative 40 [mu]m embolic protection filter, with
pores 3-4 times smaller than traditional filters used in
carotid artery stenting (CAS), providing a substantial
clinical improvement in capturing those microembolic
particles. Traditional embolic protection devices (EPDs)
have pore sizes of 100 to 150 [mu]m, allowing smaller
microemboli to pass through, which can result in strokes
and cognitive impairment for patients.
Unlike other technologies, the Neuroguard IEP[supreg] System
offers continuous protection during the most critical
phases of carotid stenting--stent deployment and balloon
dilation--when the risk of plaque dislodgement is highest.
Conventional EPDs cannot use smaller pores because they are
open throughout the entire procedure and must permit
sufficient flow to reduce the risk of thrombosis and
complications. In contrast, the Neuroguard IEP[supreg]
System integrated filter is open only during the critical
phases allowing it to use smaller pores (40 [mu]m) without
increasing thrombosis risk, delivering enhanced protection
while maintaining safety.
Unlike conventional CAS systems that rely solely on separate
EPDs, the Neuroguard IEP[supreg] System's filter is
integrated into the device and dynamically adjusted to
create a complete seal against the artery wall, ensuring
even the smallest micro-emboli are captured. This greatly
reduces the risk of embolic particles traveling to the
brain, demonstrating a substantial clinical improvement
over existing technologies in stroke prevention. The
Neuroguard IEP[supreg] System stent incorporates a hybrid
design that balances flexibility and radial strength,
enabling precise deployment and secure vessel scaffolding.
This helps to minimize risks such as restenosis or stent
migration, challenges often seen with traditional stents
that compromise either flexibility or strength.
The Neuroguard IEP[supreg] System's flexible segments
facilitate deployment in challenging anatomy while
maintaining long-term vessel support. The stent is designed
to enhance precision, reduce trauma or migration risks, and
allow for predictable deployment, helping to reduce
procedural complications. By integrating embolic
protection, stenting, and dilation into one device, the
Neuroguard IEP[supreg] System eliminates the need or
multiple devices, reducing catheter exchanges and
procedural complexity. While traditional distal embolic
protection devices have larger pores that allow micro-emoli
to reach the brain, potentionally causing stroke or
cognitive impairment, the Neuroguard IEP[supreg] System
addresses this risk by capturing micro emboli, reducing the
likelihood of such adverse events. This new mechanism of
action offers a safer and more effective approach to
treating carotid artery stenosis, representing a
substantial clinical improvement over existing
technologies.
[[Page 18135]]
Is the technology assigned to the Yes............ The Neuroguard IEP[supreg] System falls under the MS-DRGs
same MS-DRG as existing related to procedures performed on the carotid arteries,
technologies? which include stenting procedures. However, despite being
assigned to the same MS-DRG, the Neuroguard IEP[supreg]
System represents a distinct technological advancement that
warrant separate consideration under the new technology add-
on payment criteria. Its innovative approach to embolic
protection and the demonstrated substantial clinical
improvement over existing technologies justify the need for
additional payment beyond the standard MS-DRG rates to
ensure appropriate reimbursement and broader adoption of
this superior technology.
Does new use of the technology Yes............ The Neuroguard IEP[supreg] System is used to treat the same
involve the treatment of the disease, carotid artery stenosis, in the same patient
same/similar type of disease and population as existing carotid stent technologies. However,
the same/similar patient it offers substantial clinical improvements, particularly
population when compared to an in reducing the risk of stroke during the procedure.
existing technology? Traditional CAS methods rely on separate EPDs, which have
limitations in capturing small embolic particles,
especially during the riskiest parts of the procedure--
stent deployment and balloon dilation.
----------------------------------------------------------------------------------------------------------------
We have the following concerns with regard to the newness
criterion. While the applicant asserted that the Neuroguard IEP[supreg]
System is novel in that it uses a new mechanism of action because its
40 [mu]m embolic protection filter has pores 3-4 times smaller than
traditional filters used in CAS, we question whether this represents a
new mechanism of action as both Neuroguard's filter and existing
filters use a porous membrane to capture and remove embolic material
while performing angioplasty and stenting procedures in carotid
arteries. We note that the applicant asserted that this change in
filter size may impact clinical outcomes, however, this is not relevant
to mechanism of action. Furthermore, the Neuroguard IEP[supreg] System
should always be used in conjunction with an available primary distal
embolic protection device as described in the IFU,\128\ which suggests
that its filter would not impact the mechanism of action of the device.
We also note that there are other existing embolic protection filters
used during CAS procedures that have the same 40-micron pore size, such
as the Paladin Carotid Post-Dilation Balloon System with Integrated
Embolic Protection (Paladin System with IEP) from the same
manufacturer, which received FDA 510(k) clearance on September 6,
2018.\129\
---------------------------------------------------------------------------
\128\ Neuroguard IEP[supreg] 3-in-1 Carotid Stent, Post-Dilation
Balloon System with Integrated Embolic Protection (https://www.accessdata.fda.gov/cdrh_docs/pdf24/P240009A.pdf).
\129\ FDA. Section 510(k) premarket notification. Paladin
Carotid Post-Dilation Balloon System with Integrated Embolic
Protection. K181128. September 6, 2018 (https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpmn/pmn.cfm?id=K181128,
accessed 2/5/2025).
---------------------------------------------------------------------------
In addition, while the applicant asserted that the Neuroguard
IEP[supreg] System has a new mechanism of action because it integrates
a stent with an embolic protection filter that opens during stent
deployment and balloon dilation to streamline the procedure and
increase the effectiveness of embolic protection during CAS, we
question how integrating existing procedural devices into one device to
eliminate the need for multiple devices results in a different
mechanism of action, as this appears to describe an ease-of-use feature
rather than having an impact on the technology's therapeutic outcome of
improving carotid luminal diameter for patients with stenosis of the
carotid artery.\130\ It is unclear how the way in which the Neuroguard
IEP[supreg] System treats carotid artery stenosis is different from the
way in which the many existing carotid artery stents, filters, and
post-dilation balloons available on the market, used together or as
part of a system, treat carotid artery stenosis. Therefore, it appears
these technologies may have the same or a similar mechanism of action
as the Neuroguard IEP[supreg] System. We further note that the
applicant stated that the Neuroguard IEP[supreg] System treats the same
disease, carotid artery stenosis, in the same patient population as
existing carotid stent technologies, and that it maps to the same MS-
DRGs for carotid artery stenting procedures.
---------------------------------------------------------------------------
\130\ FDA. Neuroguard IEP[supreg] 3-in-1 Carotid Stent, Post-
Dilation Balloon System with Integrated Embolic Protection. Pre-
market approval. October 11, 2024.
---------------------------------------------------------------------------
Accordingly, as it appears that the Neuroguard IEP[supreg] System
and existing carotid stents or stent systems, such as the GORE Carotid
Stent, RX Acculink\TM\ Carotid Stent System, or Carotid
WALLSTENT[supreg] Monorail[supreg] Endoprosthesis, or the Paladin
System with IEP used with any available carotid artery stent, may use
the same or similar mechanism of action to achieve a therapeutic
outcome, would be assigned to the same MS-DRG, and would treat the same
or similar patient population and disease, we question whether these
technologies may be substantially similar to one another. We note that,
per our policy, if technologies are substantially similar to each
other, we use the earliest market availability date as the beginning of
the newness period for the technologies. Accordingly, if we determine
that the Neuroguard IEP[supreg] System is substantially similar to
existing carotid stents or systems as described previously, because the
3-year anniversary of the FDA clearance of all these current
technologies occurred prior to FY 2026,131 132 133 the
Neuroguard IEP[supreg] System would not be considered new.
---------------------------------------------------------------------------
\131\ The 3-year anniversary of FDA PMA approval for the RX
Acculink TM Carotid Stent System was August 30, 2007.
https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpma/pma.cfm?id=P040012.
\132\ The 3-year anniversary of FDA PMA approval for Carotid
WALLSTENT[supreg] Monorail[supreg] Endoprosthesis was October 23,
2011. https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpma/pma.cfm?id=P050019.
\133\ The 3-year anniversary of FDA PMA approval for GORE
Carotid Stent was November 1, 2021. https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpma/pma.cfm?ID=P180010.
---------------------------------------------------------------------------
We are inviting public comment on whether the Neuroguard
IEP[supreg] System is substantially similar to existing technologies
and whether the Neuroguard IEP[supreg] System meets the newness
criterion.
With respect to the cost criterion, the applicant provided two
analyses to demonstrate that the Neuroguard IEP[supreg] System meets
the cost criterion. Each analysis followed the order of operations
summarized in the following table.
[[Page 18136]]
Neuroguard IEP[supreg] System Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes, ICD-10-PCS
codes, and MS-DRGs used by the applicant, see the cost criterion codes
and MS-DRGs attachment included in the online posting for the
Neuroguard IEP[supreg] System.
Claims identified...................... Scenario 1: 13,115 claims mapping to 69 MS-DRGs, with 49.68% claims
mapping to MS-DRG 036 (Carotid Artery Stent Procedure Without CC/MCC).
Scenario 2: 11,876 claims mapping to 3 MS-DRGs, with 54.86% of claims
mapping to MS-DRG 036 (Carotid Artery Stent Procedure Without CC/MCC).
Charges removed for prior technology... Per the applicant, use of the technology would replace current existing
stent and dilating balloon technologies used in traditional carotid
artery stenting. The applicant removed charges for the existing stent
and dilating balloon by dividing the estimated costs by the national
average cost-to-charge ratio of 0.259 for Implantable Devices from the
FY 2025 IPPS/LTCH PPS final rule. The applicant did not remove
indirect charges related to the prior technology.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of the new technology by the national average cost-to-charge ratio of
0.259 for Implantable Devices from the FY 2025 IPPS/LTCH PPS final
rule. The applicant did not add indirect charges related to the new
technology.
Cost analysis results.................. Scenario 1:
--Average case-weighted threshold amount: $101,119.
--Final inflated average case-weighted standardized charge per case:
$133,183.
Scenario 2:
--Average case-weighted threshold amount: $95,139.
--Final inflated average case-weighted standardized charge per case:
$116,240.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
both analyses, the applicant asserted that the Neuroguard IEP[supreg]
System meets the cost criterion.
We are inviting public comments on whether the Neuroguard
IEP[supreg] System meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that the Neuroguard IEP[supreg] System represents a
substantial clinical improvement over existing technologies because the
Neuroguard IEP[supreg] System significantly improves clinical outcomes
relative to technologies previously available by using a 40 [mu]m
embolic protection filter that captures microemboli, unlike traditional
filters (100-150 [mu]m) that miss smaller emboli, leading to higher
stroke rates. Further, the applicant asserted that the Neuroguard
IEP[supreg] System demonstrated a zero percent stroke rate in the
PERFORMANCE I study, 1.3 percent at 30 days, and 1.8 percent at 12
months in the PERFORMANCE II study, demonstrating substantial clinical
improvement compared to other CAS technologies. The applicant provided
2 studies to support its claims, as well as a supplemental document
that presents the 30-day and 12-month stroke rates of carotid artery
stents from clinical studies, and 8 background articles about other
FDA-approved CAS or EPD technologies.\134\ The following table
summarizes the applicant's assertions regarding the substantial
clinical improvement criterion. Please see the online posting for the
Neuroguard IEP[supreg] System for the applicant's complete statements
regarding the substantial clinical improvement criterion and the
supporting evidence provided.
---------------------------------------------------------------------------
\134\ Background articles are not included in the following
table but can be accessed via the online posting for the technology.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
The Neuroguard IEP[supreg] System Langhoff R, Petrov I, Kedev S, et al., PERFORMACE 1 Study: Novel
demonstrates a substantial clinical carotid stent system with integrated post-dilation balloon and embolic
improvement over existing CAS protection device. Catheter Cardiovasc Interv. 2022 Nov;100(6):1090-
technologies by integrating an embolic 1099.
protection filter that minimizes the Gray WA, Metzger DC, Zidar J, et al. The PERFORMANCE II Trial: A
risk of stroke and cognitive Prospective Multicenter Investigation of a Novel Carotid Stent System.
impairment. JACC Cardiovasc Interv. Published online December 20, 2024.
doi:10.1016/j.jcin.2024.10.031.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
----------------------------------------------------------------------------------------------------------------
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for the
Neuroguard IEP[supreg] System.
After review of the information provided by the applicant, we have
the following concerns regarding whether the Neuroguard IEP[supreg]
System meets the substantial clinical improvement criterion. With
respect to the claim that the Neuroguard IEP[supreg] System
demonstrates a substantial clinical improvement over existing CAS
technologies by integrating an embolic protection filter that minimizes
the risk of stroke and cognitive impairment, we note that the applicant
has provided evidence comparing the effects of the Neuroguard
IEP[supreg] System to historical controls based on several clinical
trials, including the Xact[supreg] Carotid Stent System of the SECURITY
trial,\135\ the ACCULINK carotid stent of the ARCHER
[[Page 18137]]
trial,\136\ the Carotid WALLSTENT and FilterWire EX/EZ of the BEACH
trial,\137\ the GORE Carotid Stent of the SCAFFOLD trial,\138\ the
S.M.A.R.T. or Precise stent with Angioguard or Angioguard XP, Cordis
EPD of the SAPPHIRE trial,\139\ and Accunet and Acculink Systems of the
CREST trial.\140\ However, we did not receive information comparing the
Neuroguard IEP[supreg] System with other currently available treatments
developed more recently, such as GORE Carotid Stent, Sterling SL
Balloon Dilatation Catheters, or Paladin System, and we would
appreciate additional information comparing these technologies in order
to inform our assessment of substantial clinical improvement.
---------------------------------------------------------------------------
\135\ FDA. SECURITY: Xact[supreg] Carotid Stent System--P040038/
S043. Summary of Safety and Effectiveness Data. Published August 5,
2004. (https://www.fda.gov/medical-devices/recently-approved-devices/xact-carotid-stent-system-p040038s043, accessed 1/24/2025).
\136\ Gray, W.A., Hopkins, L.N., Yadav, S., et al. (2006).
Protected carotid stenting in high-surgical-risk patients: The
ARCHeR results Journal of Vascular Surgery 44(2): 258-269.
\137\ Cohen, D.J., Amarenco, P., Cramer, M.J., et al. Carotid
Artery Revascularization in High-Surgical-Risk Patients Using the
Carotid WALLSTENT and FilterWire EX/EZ: 1-Year Outcomes in the BEACH
Pivotal Group. J Am Coll Cardiol. 2008;51(4):427-434. doi:10.1016/
j.jacc.2007.10.022.
\138\ Gray, W.A., Levy, E., Bacharach, J.M., et al. (2020).
Evaluation of a novel mesh-covered stent for treatment of carotid
stenosis in patients at high risk for endarterectomy: 1-year results
of the SCAFFOLD trial. Catheter Cardiovasc Interv. 96:121-127.
\139\ Yadav, J.S., Wholey, M.H., Kuntz, R.E., Fayad, P., Katzen,
B.T., Mishkel, G.J., Bajwa, T.K., Whitlow, P., Strickman, N.E.,
Jaff, M.R., Popma, J.J., Snead, D.B., Cutlip, D.E., Firth, B.G.,
Ouriel, K., & Stenting and Angioplasty with Protection in Patients
at High Risk for Endarterectomy Investigators (2004). Protected
carotid-artery stenting versus endarterectomy in high-risk patients.
The New England Journal of Medicine, 351(15), 1493-1501. https://doi.org/10.1056/NEJMoa040127.
\140\ Brott, T.G., Hobson, R.W. 2nd, Howard, G., et al. Stenting
versus endarterectomy for treatment of carotid-artery stenosis
[published correction appears in N Engl J Med. 2010 Jul
29;363(5):498] [published correction appears in N Engl J Med. 2010
Jul 8;363(2):198]. N Engl J Med. 2010;363(1): 11-23. doi:10.1056/
NEJMoa0912321.
---------------------------------------------------------------------------
In addition, we note that the applicant compared the Neuroguard
IEP[supreg] System with historical controls based on externally
controlled trials from at least a decade ago. While the results of the
SCAFFOLD trial were published more recently, in 2020, other externally
controlled trials were published or completed at least a decade earlier
(SAPPHIRE: 2004; SECURITY: 2005; ARCHER: 2006; BEACH: 2008; CREST:
2010; ROADSTER: 2015). In particular, SAPPHIRE was conducted when CAS
was new.\141\ We also note that the pre- and post-treatment protocols
for the PERFORMANCE II trial were more comprehensive compared to those
of the SAPPHIRE trial \142\ and that this may reflect changes in
standards of care over the past two decades. For example, we note that
the patients in the PERFORMANCE II had been given clopidogrel 75 mg (or
equivalent) and aspirin 75 mg daily for one week before surgery, and
dual antiplatelet therapy was required for at least 30 days after the
procedure (and thereafter, at the physician's discretion and standard
of care), whereas the patients in the SAPPHIRE trial were given an
aspirin at a dose of 81 or 325 mg per day for at least 72 hours before
the procedure and indefinitely after the procedure, and with
clopidogrel 75 mg per day starting 24 hours before the procedure and
continuing for two to four weeks after the procedure. We are also
concerned that observed differences between the Neuroguard IEP[supreg]
System and the historical controls may also reflect improvements in
stent devices, access approaches, and embolic protection methods over
the past decade that aimed at reducing the risk of stroke associated
with CAS.\143\ Therefore, we question whether the observed lower stroke
rate was at least partly the result of a more advanced and
comprehensive treatment protocol. We also question whether growth in
CAS volume, a multitude of commercially available FDA-approved carotid
stents, changes in standard of care, and trends in the prevalence of
diabetes and hypertension in the U.S. population during the last two
decades were considered in the interpretation of the findings of the
two PERFORMANCE trials.
---------------------------------------------------------------------------
\141\ Yadav (2004), op. cit.
\142\ Yadav (2004), op. cit.
\143\ UpToDate. (2024). Overview of carotid artery stenting.
UpToDate. Retrieved from https://www.uptodate.com/contents/overview-
of-carotid-artery-stenting/
print?search=carotid%20artery%20stenting&source=search_result&selecte
dTitle=1~3.
---------------------------------------------------------------------------
We are also concerned about the use of historical controls, given
the differences among the trials, and question how these differences
were taken into account in the development of the performance goal and
in the comparison with the Neuroguard IEP[supreg] System on improving
clinical outcomes. First, those trials differed in study design
(SECURITY: non-randomized; BEACH, SCAFFOLD: single-arm; SAPPHIRE: RCT;
CREST: RCT permuted block design) and length of follow-up (SECURITY,
BEACH, ARCHER: 365 days; other: 3 years). Because these trials were not
uniform in study design, we question whether results from these trials
are comparable to each other. We further question whether the
applicable technologies can be compared based on the outcomes achieved
across these trials without considering differences between the
clinical trials with respect to whether randomization and/or blinding
were used in the study protocols, how patients were recruited and
enrolled, patients' baseline clinical attributes, or length of follow
up.\144\ We also note that these trials defined some of their endpoints
differently. For example, the SECURITY and SCAFFOLD trials measured 12-
month outcomes, while the SAPPHIRE and ARCHER trials examined 31- to
365-day outcomes. While most of these trials assessed non-fatal
myocardial infection (MI) and all-cause deaths, the BEACH trial
reported Q-wave MI and neurologic deaths. Furthermore, we note that
different inclusion criteria for asymptomatic patients were used, with
the SAPPHIRE, SECURITY, BEACH, and SCAFFOLD trials including
asymptomatic patients with >=80 percent stenosis, and the CREST trial
>=70 percent stenosis. Regarding heterogeneity in the baseline clinical
attributes of the patient samples, we note that the SECURITY, ARCHER,
and BEACH trials included patients at least 80 years of age, while
other trials did not. We further note that differences in the study
population comorbidities and lesion characteristics may impact
outcomes. In particular, the PERFORMANCE II trial had a higher
proportion of diabetic patients (43 percent) than the SAPPHIRE (25
percent), CREST (31 percent), SECURITY (31 percent), and SCAFFOLD (40
percent) trials. Its proportion of patients with hypertension (93
percent) was higher than that of other trials (ARCHER: 84 percent;
CREST: 86 percent; SAPPHIRE: 86 percent: BEACH: 89 percent). Its
proportion of symptomatic patients (20 percent) was higher than that of
the SCAFFOLD trial (13 percent), and lower than that of the ARCHER
trial (24 percent). We are concerned that without adjusting for these
differences across the trials, their results may not be comparable. We
also question whether the lack of adjustment could have impacted
accuracy of the performance goal which was based on the results of
these trials. We welcome information about how these differences were
accounted for in the development of the performance goal. We also
welcome comments on how to consider the use of historical controls to
compare the Neuroguard IEP[supreg] System's effects on clinical outcome
improvement. Moreover, we are interested in information about the
weighted objective performance criteria approach. Per the applicant,
this approach adjusted for comorbid and anatomic
[[Page 18138]]
high-risk factors and was calculated based on data from the ARCHER,
SECURITY, BEACH, and SCAFFOLD trials. We also welcome information about
how the comparative studies were selected.
---------------------------------------------------------------------------
\144\ Collignon O, Schritz A, Spezia R, et al. Implementing
historical controls in oncology trials. The Oncologist 2021
(26):e858-e862.
---------------------------------------------------------------------------
We also question whether the observed differences in clinical
outcomes between the Neuroguard IEP[supreg] System and the performance
goal based on the historical comparator trials are statistically
significant and clinically meaningful. For example, the applicant
stated that the Neuroguard IEP[supreg] System demonstrated the result
of zero percent for both 30-day and 12-month stroke rates in the
PERFORMANCE I study, and 1.3 percent for the 30-day and 1.8 percent 12-
month stroke rates in the PERFORMANCE II study. The applicant further
stated that these rates were significantly lower than published
clinical trials with similar symptomatic and asymptomatic patient
populations, ARCHER (6.9 percent), BEACH (4.5 percent), SCAFFOLD (1.0
percent) SAPPHIRE (4.8 percent), and CREST (4.1 percent). We note that
the SCAFFOLD trial reported a 30-day stroke rate of 1.1 percent for the
primary analysis population, compared to the 1.3 percent rate in the
PERFORMANCE II study. We welcome information about whether these
differences were statistically significant and clinically meaningful,
and how statistical significance was determined. We also welcome
information about the weighted Z-test for the primary endpoint and how
it may fully account for variability in patient comorbidities or
procedural differences and enhance generalizability.
We are inviting public comments on whether the Neuroguard
IEP[supreg] System meets the substantial clinical improvement
criterion.
k. RYSTIGGO[supreg] (Rozanolixizumab-Noli)
UCB, Inc. submitted an application for new technology add-on
payments for RYSTIGGO[supreg] for FY 2026. According to the applicant,
RYSTIGGO[supreg] is a neonatal Fc receptor (FcRn) blocker indicated for
the treatment of generalized myasthenia gravis (gMG) in adult patients
who are anti-acetylcholine receptor (AChR) or anti-muscle-specific
tyrosine kinase (MuSK) antibody positive (ab+). The applicant stated
that gMG is a rare chronic autoimmune disorder in which antibodies
destroy the communication between nerves and muscle, resulting in
weakness of the skeletal muscles, particularly the eyes, mouth, throat,
and limbs. Per the applicant, some gMG patients have MuSK ab+, a
subtype of gMG that may lead to more severe symptoms and limited
treatment options.
Please refer to the online application posting for
RYSTIGGO[supreg], available at https://mearis.cms.gov/public/publications/ntap/NTP2410073H0PQ, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
RYSTIGGO[supreg] was granted BLA approval from FDA on June 26, 2023,
for the treatment of gMG in adult patients who are AChR ab+ or MuSK
ab+. According to the applicant, RYSTIGGO[supreg] was not available for
sale until July 20, 2023, the date on which the product was released
from U.S. Customs after being shipped from an overseas manufacturing
facility. Per the applicant, RYSTIGGO[supreg] is administered as a
subcutaneous infusion once each week for 6 weeks. Per the applicant,
RYSTIGGO[supreg] is available in single-dose vials that contain 280 mg,
420 mg, 560 mg, or 840 mg of RYSTIGGO[supreg] at a concentration of 140
mg/mL. The applicant noted it used the following equation to calculate
the weighted average cost per inpatient stay: [(percent of patients
whose weight aligns to the 3mL vial x cost of the 3mL vial) + (percent
of patients whose weight aligns to the 4mL vial x cost of the 4mL vial)
+ (percent of patients whose weight aligns to the 6mL vial x cost of
the 6mL vial/100%] x 2 doses. The applicant stated that the typical
inpatient stay for patients with gMG is 11 to 13 days, and thus, 2
doses would usually be administered during a typical inpatient stay.
According to the applicant, there are currently no ICD-10-PCS
procedure codes to distinctly identify RYSTIGGO[supreg]. We note that
the applicant submitted a request for approval for a unique ICD-10-PCS
procedure code for RYSTIGGO[supreg] beginning in FY 2026. The applicant
stated that G70.00 (Myasthenia gravis without (acute) exacerbation) and
G70.01 (Myasthenia gravis with (acute) exacerbation) may be used to
currently identify the indication for RYSTIGGO[supreg] under the ICD-
10-CM coding system.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that RYSTIGGO[supreg] is not substantially similar to other
currently available technologies because, while other treatments are
available for gMG, about 40 percent of patients continue to experience
exacerbations, and that RYSTIGGO[supreg] is the only treatment for
patients with gMG who are AChR or MuSK ab+, and that therefore, the
technology meets the newness criterion. The following table summarizes
the applicant's assertions regarding the substantial similarity
criteria. Please see the online application posting for
RYSTIGGO[supreg] for the applicant's complete statements in support of
its assertion that RYSTIGGO[supreg] is not substantially similar to
other currently available technologies.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... RYSTIGGO[supreg] is a subcutaneously infused monoclonal antibody
action to achieve a therapeutic outcome? (mAb) that specifically targets FcRn with high affinity,
permitting the accelerated removal of all subclasses of
immunoglobulin G (IgG). There are specific differences in FcRn
affinities between RYSTIGGO[supreg] and other FcRn inhibitors.
RYSTIGGO[supreg] is the only FcRn inhibitor that is FDA-approved
for MuSK ab+ gMG in adults.
Is the technology assigned to the same MS-DRG as existing Yes.................... The administration of RYSTIGGO[supreg] to treat gMG is not expected
technologies? to change the MS-DRG assignment of the discharge.
Does new use of the technology involve the treatment of No..................... While other treatments are available for gMG, about 40% of patients
the same/similar type of disease and the same/similar continue to experience gMG exacerbation, suggesting an inadequate
patient population when compared to an existing response to existing treatment. RYSTIGGO[supreg] is the only FDA-
technology? approved treatment for patients with gMG that are MuSK ab+.
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 18139]]
With respect to the substantial similarity criteria, while the
applicant stated that RYSTIGGO[supreg] does not use the same or a
similar mechanism of action as compared to existing technologies
because there are specific differences in FcRn affinities between
RYSTIGGO[supreg] and other FcRn inhibitors, we are unclear as to what
the specific differences are and whether they rise to the level of a
new mechanism of action. We note that VYVGART[supreg] is also an FcRn
inhibitor approved for use in patients with gMG, and per FDA
prescribing information, both technologies bind to the FcRn resulting
in the reduction of circulating IgG.145 146 We welcome
additional information about how the mechanism of action for
RYSTIGGO[supreg] differs from other existing FDA-approved therapies,
including FcRn inhibitors such as VYVGART[supreg]. We note that the
applicant also stated that RYSTIGGO[supreg] does not involve the
treatment of the same or similar type of disease and the same or
similar patient population when compared to an existing technology
because while there are other treatments for gMG, about 40 percent of
patients continue to experience gMG exacerbation, suggesting an
inadequate response to existing treatment and RYSTIGGO[supreg] is the
only FDA-approved treatment for patients with gMG that are MuSK ab+.
However, we note there are other standard of care treatment options for
patients with AChR ab+ and MuSK ab+ gMG, such as pyridostigmine,
glucocorticoid therapy, and plasmapheresis. In addition,
VYVGART[supreg], ULTOMIRIS[supreg], ZILBRYSQ[supreg], and
SOLIRIS[supreg] are also treatment options for patients with AChR ab+
gMG. Therefore, we question the assertion that RYSTIGGO[supreg] does
not involve the treatment of the same or similar type of disease and
the same or similar patient population when compared to existing
technology.
---------------------------------------------------------------------------
\145\ argenx U.S., Inc. VYVGART[supreg] (efgartigimod alfa-fcab)
injection [Package Insert]. (Revised 8/2024). Available at: https://www.accessdata.fda.gov/drugsatfda_docs/label/2024/761195s004,761304s003lbl.pdf.
\146\ UCB, Inc. RYSTIGGO[supreg] (rozanolixizumab-noli)
injection, for subcutaneous use [Package Insert]. (Revised 6/2024).
Available at: https://www.accessdata.fda.gov/spl/data/c6e71126-50c1-4ae2-9d82-b053d605b9cb/c6e71126-50c1-4ae2-9d82-b053d605b9cb.xml.
---------------------------------------------------------------------------
We are inviting public comments on whether RYSTIGGO[supreg] is
substantially similar to existing technologies and whether
RYSTIGGO[supreg] meets the newness criterion.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that RYSTIGGO[supreg] meets the cost criterion.
The analysis followed the order of operations summarized in the
following table.
RYSTIGGO[supreg] Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes and MS-DRGs
used by the applicant, see the cost criterion codes and MS-DRGs
attachment included in the online posting for RYSTIGGO[supreg].
Claims identified...................... 22,213 claims mapping to 641 MS-DRGs, with none exceeding more than
8.28% of the total identified cases.
Charges removed for prior technology... Per the applicant, use of the technology may replace current drug
charges for therapies. The applicant removed 100% of drug charges from
the identified cases, which, as the applicant stated, is likely an
overestimation of charges that would be replaced by RYSTIGGO[supreg]
since patients may receive some ancillary drug treatments with
RYSTIGGO[supreg]. The applicant did not remove indirect charges
related to the new technology.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2025 IPPS/LTCH PPS interim final
action with comment period.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of the new technology by the national average cost-to-charge ratio of
0.178 for Drugs and Cellular Therapies from the FY 2025 IPPS/LTCH PPS
final rule. The applicant did not add indirect charges related to the
new technology.
Cost analysis results.................. Average case-weighted threshold amount: $80,760.
Final inflated average case-weighted standardized charge per case:
$236,731.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant asserted that RYSTIGGO[supreg] meets the cost criterion.
We are inviting public comments on whether RYSTIGGO[supreg] meets
the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that RYSTIGGO[supreg] represents a substantial
clinical improvement over existing technologies because
RYSTIGGO[supreg] is the only FDA-approved product for anti-MuSK ab+ gMG
in adult patients, and is an option for patients unresponsive to, and
not treated by, conventional therapies. The applicant also asserted
that RYSTIGGO[supreg] significantly improves clinical outcomes relative
to services or technologies previously available. The applicant
provided seven articles regarding the MycarinG study and its open-label
extension studies, as well as a meta-analysis regarding efficacy of
newer therapies for MG, to support these claims. The following table
summarizes the applicant's assertions regarding the substantial
clinical improvement criterion. Please see the online posting for
RYSTIGGO[supreg] for the applicant's complete statements regarding the
substantial clinical improvement criterion and the supporting evidence
provided.
[[Page 18140]]
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments
----------------------------------------------------------------------------------------------------------------
RYSTIGGO[supreg] is the only FDA- Habib AA, Sacconi S, Antonini G, et al. Efficacy and safety of
approved therapy for gMG in adult rozanolixizumab in patients with muscle-specific tyrosine kinase
patients who are MuSK ab+. antibody-positive generalised myasthenia gravis: a subgroup analysis
of the randomised, double-blind, placebo-controlled, adaptive phase
III MycarinG study. Ther Adv Neurol Disord. 2024a;17:1-16.
Bril V, Druzdz A, Grosskreutz J, et al. Safety and efficacy of
rozanolixizumab in patients with generalised myasthenia gravis
(MycarinG): a randomised, double-blind, placebo-controlled, adaptive
phase 3 study. Lancet Neurol. 2023a;22(5):383-394.
Habib AA, Sacconi S, Pascuzzi RM, et al. Repeated cycles of
rozanolixizumab treatment in patients with muscle-specific kinase
antibody-positive generalized myasthenia gravis [Poster 203]. AANEM
2023.
RYSTIGGO[supreg] provides a treatment Bril, 2023a, op. cit.
option for adult patients with Vu T, Druzdz A, Habib AA, et al. Efficacy of rozanolixizumab in
generalized myasthenia gravis (gMG) generalized myasthenia gravis: subgroup analyses from the randomized
whose disease is not responsive to, phase 3 MycarinG study [Abstract 002951], AAN 2023.
and not treated by, conventional
therapies.
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
RYSTIGGO[supreg] offers further Bril V, Druzdz A, Grosskreutz J, et al. Long-term efficacy and safety
clinical improvement in addition to of symptom-driven cyclical rozanolixizumab treatment in patients with
standard of care (SOC) therapies for generalized myasthenia gravis: A pooled analysis of a Phase 3 study
adult patients with gMG. and two open-label extension studies [P1-5.012]. Neurology.
2023b;100(17_supplement_2):3747.
Sacconi S, Habib AA, Antonini G, et al. Rozanolixizumab in muscle-
specific kinase autoantibody-positive myasthenia gravis: Further
analyses from MycarinG study [Poster EPO-391]. EAN 2023.
Sacc[agrave] F, Pane C, Espinosa PE, Sormani MP, Signori A. Efficacy of
innovative therapies in myasthenia gravis: A systematic review, meta-
analysis and network meta-analysis. Eur J Neurol. 2023;30:3854-3867.
Habib AA, Kaminski HJ, Grosskreutz J, et al. Clinically meaningful
improvement in physical fatigue and muscle weakness fatigability with
rozanolixizumab: Post hoc analysis of MG Symptoms PRO responder rates
in the MycarinG study [Poster P4-11-001]. AAN 2024b.
----------------------------------------------------------------------------------------------------------------
We also received written public comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
RYSTIGGO[supreg].
Comment: The applicant submitted a comment in response to questions
raised at the Town Hall. Regarding a question on the differences in the
sample sizes reported within the Bril et al. (2023a) study versus the
FDA \147\ integrated review, the applicant restated the patient
population included in the MycarinG study, as described in Bril et al.
(2023a) and Habib et al. (2024a). Per the applicant, the information
from the MycarinG study aligns with the product label.\148\ The
applicant further noted that the number of study participants may vary
based on the analysis conducted (intent to treat, data availability,
study completion, etc.). The applicant emphasized that gMG is a rare
disease, with the MuSK ab+ patient population being even rarer.
According to the applicant, the number of patients in the MycarinG
study is consistent with other rare disease treatment clinical trials
and was acceptable to FDA.
---------------------------------------------------------------------------
\147\ U.S. Food and Drug Administration, Center for Drug
Evaluation and Research (2023). Integrated Review of BLA 761286
(RYSTIGGO[supreg]). U.S. Department of Health and Human Services.
https://www.accessdata.fda.gov/drugsatfda_docs/nda/2023/761286Orig1s000IntegratedR.pdf.
\148\ UCB, Inc., 2024, op. cit.
---------------------------------------------------------------------------
Regarding a question asking about why the applicant used a post hoc
97.5 percent CI instead of a 95 percent CI for statistical significance
in the MycarinG study, how such significance was found in the MuSK ab+
subgroup analysis when there were only 16 MuSK ab+ patients in the
MycarinG study (discussed further later in this section), and how
significance was only found in those treated in the 7mg/kg dose but not
the 10mg/kg dose in the MG-ADL and not for either dose in the
quantitative myasthenia gravis score (QMG) assessment, the applicant
stated that the parallel gatekeeping approach was used for the primary
and secondary endpoints. The applicant stated that this was a means of
adjusting for multiple testing across the 2 dose arms and across the
different endpoints, while maintaining an overall type 1 error rate of
5 percent. According to the applicant, in the primary endpoint, each
dose arm was tested against placebo at two and a half percent. The
applicant commented that the MuSK ab+ subgroup analysis was part of the
planned efficacy analysis and that the results were clinically
significant in having over a two-point reduction in MG-ADL, but noted
that these results were not subject to planned statistical testing.
The applicant also responded to a question on the validity of the
MG-ADL and QMG used in the MycarinG study, including why the MG-ADL was
used as the primary endpoint. The applicant stated that objective
assessments were the primary endpoint for clinical trials related to
gMG prior to 2017. The applicant stated that the REGAIN trial (Howard
et al., 2017),\149\ evaluating eculizumab, was published in 2017 and
was the first trial to introduce MG-ADL as a primary endpoint.
According to the applicant, the current FDA standard evolved following
the REGAIN trial, and, consistent with FDA direction to manufacturers,
most ongoing phase 3 trials now rely on the MG-ADL as a primary
endpoint, emphasizing patient-reported outcome measures which may be
more sensitive to clinical change than QMG. The applicant further noted
that currently available MG-specific outcome measures include
objective,
[[Page 18141]]
patient-reported, and composite measures. Per the applicant, in the
MycarinG study, patient-reported and objective measures were used as
either primary or secondary endpoints. The applicant stated that
several studies have been conducted to assess validity and correlation
of different MG endpoints, and that expert consensus has recommended
the use of standardized assessments such as MG-ADL or QMG scores in
assessment of patients with gMG. The applicant included several
articles on validation, correlation, and consensus on addressing
variability in MG clinical trials.150 151 152 153 The
applicant stated that it appreciates that CMS is not bound by FDA
determinations, but asserted that it is practically impossible,
particularly in rare disease trials, to use different assessment
measures when government agencies suggest conflicting measurements.
---------------------------------------------------------------------------
\149\ Howard, J.F., Jr, Freimer, M., O'Brien, F., Wang, J.J.,
Collins, S.R., Kissel, J.T. and (2017), QMG and MG-ADL correlations:
Study of eculizumab treatment of myasthenia gravis. Muscle Nerve,
56: 328-330. https://doi.org/10.1002/mus.25529.
\150\ Howard, 2017, op. cit.
\151\ McPherson, T., Aban, I., Duda, P.W., Farzaneh-Far, R.,
Wolfe, G.I., Kaminski, H.J., Cutter, G., Lee, I., & of the MGTX
Study Group (2020). Correlation of Quantitative Myasthenia Gravis
and Myasthenia Gravis Activities of Daily Living scales in the MGTX
study. Muscle & Nerve, 62(2), 261-266. https://doi.org/10.1002/mus.26910.
\152\ Meisel, A., Sacc[agrave], F., Spillane, J., Vissing, J., &
MG Collegium Sub-committee. (2024). Expert consensus recommendations
for improving and standardising the assessment of patients with
generalised myasthenia gravis. European Journal of Neurology, 31(7),
e16280. https://doi.org/10.1111/ene.16280.
\153\ Thomsen j.L.S, Andersen H. (2020). Outcome measures in
clinical trials of patients with myasthenia gravis. Front Neurol.
11, 596382. https://doi.org/10.3389/fneur.2020.596382.
---------------------------------------------------------------------------
Finally, in response to a question asking how RYSTIGGO[supreg]
compares with existing standard of care therapies and specifically
newer agents, the applicant stated that RYSTIGGO[supreg] was not
compared against a treatment-na[iuml]ve placebo group for ethical
reasons. Per the applicant, in the MycarinG trial, patients in the
placebo and treatment groups were allowed to remain on their standard
of care therapies, such as non-steroidal immunosuppressive therapy
(methothrexate, cyclosporine, azathioprine, tacrolimus), steroids, and
pyridostigmine, such that they were randomized to either the
RZL+standard-of-care group or the placebo+standard-of-care group. The
applicant stated that the MycarinG study therefore looked at the
benefits of RYSTIGGO[supreg] beyond standard of care therapies.
According to the applicant, for the reasons previously explained, there
is no head-to-head comparison against other biologics or newer
therapies available in treatment-na[iuml]ve patients. The applicant
noted that currently available therapies also do not have an FDA
indication for MuSK ab+ gMG.
We also received a few comments expressing general support for new
technology add-on payments for RYSTIGGO[supreg] stating that
RYSTIGGO[supreg] offers a new and significant clinical improvement in
care for gMG patients who are MuSK ab+.
Response: We thank the applicant and commenters for their comments.
After review of the information provided by the applicant and the
public comments received in response to the New Technology Town Hall
meeting, we have the following concerns regarding whether
RYSTIGGO[supreg] meets the substantial clinical improvement criterion.
While the applicant stated that RYSTIGGO[supreg] is the only FDA-
approved therapy for gMG in adult patients who are MuSK ab+, and that
this subtype is challenging to treat, as patients are usually
unresponsive and often intolerant of pyridostigmine (a standard first-
line MG therapy), we note that the applicant also stated that 3,4-
diaminopyridine treatments may have mild to moderate effect. We further
note that, as mentioned previously, other therapies such as
pyridostigmine, glucocorticoid therapy, and plasmapheresis are also
available options for these patients, and we therefore question that
RYSTIGGO[supreg] offers a treatment option for patients with MuSK ab+
gMG who have no other treatment options. The applicant also stated that
RYSTIGGO[supreg] provides a treatment option for the approximately 10
to 20 percent of patients with gMG whose disease is not responsive to,
and not treated by, conventional therapies due to inadequate response
or intolerable side effects, however, we question whether the evidence
provided demonstrates that there is a population of patients with gMG
with no other treatment options. To support this claim, the applicant
provided the double-blind, placebo-controlled, phase 3 MycarinG study,
which randomized 200 patients (1:1:1) to receive RYSTIGGO[supreg] 7 mg/
kg, RYSTIGGO[supreg] 10 mg/kg, or placebo in addition to their current
gMG treatment (where permitted by the study inclusion criteria) for 6
weeks, as well as an abstract of a post hoc subgroup analysis of this
study (Vu et al., 2023) which stratified trial results based on the
number of prior therapies.\154\ The applicant stated that the MycarinG
study demonstrated RYSTIGGO[supreg], in addition to standard of care,
significantly improved clinical outcomes by reducing MG-ADL, QMG, and
MG Composite (MGC) scores in adult patients with gMG, including those
with prior standard of care treatments such as corticosteroids,
parasympathomimetics, and non-steroidal immunosuppressants. We note
that permitted concomitant medications were cholinesterase inhibitors,
oral corticosteroids, azathioprine, ciclosporin, methotrexate,
mycophenolate mofetil, and tacrolimus. All of these medications, except
for cholinesterase inhibitors, required a stable dose. We question if
the cholinesterase inhibitor dose may have affected the results of the
study since the dose may not have been stable throughout the trial. In
addition, other standard of care treatment options for patients were
excluded, including rituximab products, VYVGART[supreg],
ULTOMIRIS[supreg], ZILBRYSQ[supreg], and SOLIRIS[supreg], and we
therefore question if RYSTIGGO[supreg] is the only treatment option for
patients with gMG who have failed conventional therapy.
---------------------------------------------------------------------------
\154\ Bril, 2023a, op. cit.
---------------------------------------------------------------------------
The applicant also provided an abstract of a subgroup analysis (Vu
et al., 2023) of the MycarinG study and stated the subgroup analysis
demonstrated that RYSTIGGO[supreg] significantly improved outcomes
based on a reduction in MG-ADL in patients who had previously undergone
myasthenia gravis standard treatments based on stratification on number
of prior therapies, excluding acetylcholinesterase inhibitors, but
including corticosteroids, non-steroidal immunosuppressants, IVIg, and
plasma exchange. However, it is unclear how a subgroup analysis on the
number of prior therapies provides evidence that RYSTIGGO[supreg] is
the only treatment option for patients unresponsive to conventional
therapies. We also note that acetylcholinesterase inhibitors were
excluded from this subgroup analysis, but these are part of the
standard of care for MG.
With respect to the applicant's assertion that RYSTIGGO[supreg]
improves clinical outcomes over existing therapies, the applicant
submitted three presentation posters (Bril et al., 2023b; Sacconi et
al., 2023; Habib et al., 2024b) that provided efficacy and safety
results from the MycarinG study and 2 open-label extension studies
(MG0004 and MG007) which we note are not published or peer-reviewed. We
note that two of the poster presentations (Bril et al., 2023b and Habib
et al., 2024b) do not report the statistical significance of results
and, therefore, we are uncertain as to how significant the results are.
With regards to the MycarinG study, per the applicant's Town Hall
comment, patients were allowed to remain on standard of care therapies
such as non-
[[Page 18142]]
steroidal immunosuppressive therapy, steroids, and pyridostigmine.
However, we note that various other standard of care therapies were
excluded such as rituximab products, VYVGART[supreg],
ULTOMIRIS[supreg], ZILBRYSQ[supreg], and SOLIRIS[supreg]. Without a
comparison to these therapies, we question whether RYSTIGGO[supreg]
improves clinical outcomes relative to all previously available
therapies. Given the 6-week duration of the trial, we also question how
natural changes in symptoms were accounted for since symptoms can wax
and wane in patients with gMG. We further note that the MycarinG and
the open-label extension studies involved only 8 weeks (MycarinG and
MG0004) or 16 weeks (MG0007) of observation, which makes it more
difficult to assess the frequency of prolonged remission rates and how
the adverse event rates, such as for cancer and infection, compare with
existing therapies. We are also interested in more information on the
lack of a dose-response effect with RYSTIGGO[supreg]. For instance,
there was a least squares mean (LSM) in MG-ADL of -7.28 in the
rozanolixizumab (RLZ) 7 mg/kg group and -4.16 in the RLZ 10 mg/kg group
within the MuSK ab+ population and an LSM of -3.03 in the RLZ 7 mg/kg
group and a similar LSM of -3.36 in the RLZ 10 mg/kg group within the
AChR ab+ population. We also note there is only about a 2 to 2.5-point
difference between RYSTIGGO[supreg] and placebo for MG-ADL in the AChR
ab+ subpopulation and the overall population. Specifically, for the
AChR ab+ population, the LSM difference versus placebo in the RLZ 7 mg/
kg group was -1.94 and in the RLZ 10 mg/kg group was -2.26 and for the
overall population, the LSM difference versus placebo was -2.59 in the
RLZ 7 mg/kg group and -2.62 in the RLZ 10 mg/kg group. The applicant
stated that these findings were statistically significant. We note that
the study considered a 2-point difference in MG-ADL as a clinically
meaningful improvement. We would appreciate clarification on how the
study defined clinically meaningful improvement.
In addition, with respect to the MuSK ab+ population in the
MycarinG trial, we note there were 21 MuSK ab+ patients in the studies
submitted by the applicant. We further note that the FDA Integrated
Review for RYSTIGGO[supreg] indicated that 16 patients tested positive
for the MuSK ab+ and we would appreciate clarification regarding this
discrepancy in numbers. We note in its Town Hall comment that the
applicant emphasized that gMG, particularly MuSK positive gMG, is a
rare disease and the number of patients in the study is consistent with
other rare disease treatment clinical trials and was acceptable to the
FDA. However, we question if the results are generalizable to the
Medicare population since only 2 patients treated with RYSTIGGO were
from the U.S. and only 1 patient treated was 65 years or older.\155\ We
also note that not all efficacy outcomes were statistically significant
within the MuSK ab+ population. Specifically, the LSM difference in QMG
between RYSTIGGO[supreg] and placebo was not statistically significant
for either the RLZ 7 mg/kg group (97.5 percent confidence interval -
14.24, 0.41) nor the RLZ 10 mg/kg group (97.5 percent confidence
interval -9.73, 3.45). Further, we note there appears to be a
difference in the disease severity between the MuSK ab+ patients in the
placebo and treatment arms. For example, results from Habib et al.
(2024a) indicated that among the MuSK ab+ population of the MycarinG
study, all patients with severe (Class IV) disease at baseline per the
Myasthenia Gravis Foundation of America (MGFA) classification system
were in the placebo arm (\3/8\), while individuals in the treatment
groups all had mild or moderate (Class II or Class III) disease at
baseline. We question how this difference may have impacted the placebo
group's outcomes relative to the those of the treatment groups.
Additionally, a higher percentage of patients were taking
corticosteroids in the RYSTIGGO[supreg] groups (80 percent in 7 mg/kg
group and 87.5 percent in 10 mg/kg group) compared to placebo (62.5
percent) and we question if this difference in background therapy could
have affected the outcomes since oral corticosteroids were a permitted
concomitant medication in the trial. We also note that the trial
excluded individuals with severe oropharyngeal or respiratory weakness,
and we question whether this exclusion would affect the
generalizability of the results for this MuSK ab+ subpopulation, as the
applicant indicated that patients with MuSK ab+ gMG tend to have more
severe disease with a potential unmet need for treatment options.
---------------------------------------------------------------------------
\155\ U.S. FDA CDER, 2023, op. cit.
---------------------------------------------------------------------------
The applicant also provided a meta-analysis comparing innovative
therapies in MG, stating that it demonstrated that anti-FcRn treatments
such as RYSTIGGO[supreg] showed greater effects on QMG, MGC, and MG-
QoL15 compared to complement inhibitors, with VYVGART[supreg] and
RYSTIGGO[supreg] having the highest probabilities of being the most
effective treatment for MG-ADL and QMG. However, we note that the same
article indicated no significant difference in MG-ADL between
complement inhibitors and anti-FcRn treatments. Additionally, we note
that the analysis found that VYVGART[supreg] had the highest
probability of being the best treatment, followed by
RYSTIGGO[supreg].\156\ We note that we did not receive any other
evidence comparing complement inhibitors or anti-FcRn treatments with
RYSTIGGO[supreg] to demonstrate improved outcomes. Therefore, we would
appreciate additional information comparing RYSTIGGO[supreg] to these
other therapies in order to inform our assessment of whether
RYSTIGGO[supreg] demonstrates a substantial clinical improvement over
existing technologies. In addition, we note that the meta-analysis
included seven clinical trials, only two of which included patients
positive for MuSK ab+, MycarinG and ADAPT, a trial studying
VYVGART[supreg]. The meta-analysis did not include trials studying
other standard of care therapies in patients with MuSK ab+ gMG. Since
the meta-analysis did not include a comparison of current therapies in
patients with MuSK ab+ gMG, we question how this analysis demonstrates
RYSTIGGO[supreg] improves clinical outcomes relative to previously
available therapy for patients with MuSK ab+ gMG.
---------------------------------------------------------------------------
\156\ Sacc[agrave], 2023, op. cit.
---------------------------------------------------------------------------
We also note that, while the applicant stated that RYSTIGGO[supreg]
meets patient preferences for convenience by its ability to be
administered via a subcutaneous infusion by a healthcare provider,
either at an infusion clinic or at home with nurse assistance, the
applicant does not provide a comparison of administration to other
available therapies. We would further appreciate additional information
on how the administration method for RYSTIGGO[supreg] demonstrates that
the technology significantly improves one or more of the clinical
outcomes described under the regulations at Sec. 412.87(b)(1)(ii)(C).
We are inviting public comments on whether RYSTIGGO[supreg] meets
the substantial clinical improvement criterion.
l. SYMVESSTM (Acellular Tissue Engineered Vessel-Tyod)
Humacyte, Inc. submitted an application for new technology add-on
payments for SYMVESSTM for FY 2026. According to the
applicant, SYMVESSTM is a bioengineered, implantable blood
vessel indicated for use in adults as a vascular conduit for extremity
arterial injury when urgent
[[Page 18143]]
revascularization is needed to avoid imminent limb loss and when
autologous vein grafting is not feasible. The applicant stated that
SYMVESSTM is composed of organized extracellular matrix
proteins in the tubular form of a blood vessel and is used to repair,
bypass, or replace arteries that have sustained traumatic injuries.
Please refer to the online application posting for
SYMVESSTM, available at https://mearis.cms.gov/public/publications/ntap/NTP24100639G2M, for additional detail describing the
technology and the disease treated by the technology.
With respect to the newness criterion, according to the applicant,
SYMVESSTM was granted BLA approval from FDA on December 19,
2024, for use in adults as a vascular conduit for extremity arterial
repair when urgent revascularization is needed to avoid imminent limb
loss, and when autologous vein grafting is not feasible. The applicant
stated that FDA required a lot release that shows results of all
applicable tests prior to distribution of SYMVESSTM and that
it submitted the required paperwork to FDA on December 26, 2024. The
applicant stated that on February 26, 2025, FDA notified the applicant
that the required review of commercial batch information was completed
and authorized the applicant to commence commercial shipment;
therefore, per the applicant, SYMVESSTM became commercially
available as of February 26, 2025. Per the applicant, the average
number of units of SYMVESSTM anticipated to be used per
inpatient stay is 1 unit.
The applicant stated that, effective October 1, 2024, the following
ICD-10-PCS codes may be used to uniquely describe procedures involving
the use of SYMVESSTM: X2R50WA (Replacement of right upper
extremity artery using bioengineered human acellular vessel, open
approach, new technology group 10), X2R60WA (Replacement of left upper
extremity artery using bioengineered human acellular vessel, open
approach, new technology group 10), X2R70WA (Replacement of right lower
extremity artery using bioengineered human acellular vessel, open
approach, new technology group 10), or X2R80WA (Replacement of left
lower extremity artery using bioengineered human acellular vessel, open
approach, new technology group 10).
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that SYMVESSTM is not substantially similar to
other currently available technologies because it does not use the same
or a similar mechanism of action compared to existing technologies, and
that therefore, the technology meets the newness criterion. The
following table summarizes the applicant's assertions regarding the
substantial similarity criteria. Please see the online application
posting for SYMVESSTM for the applicant's complete
statements in support of its assertion that SYMVESSTM is not
substantially similar to other currently available technologies.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... SYMVESSTM uses a unique mechanism of action compared to existing
action to achieve a therapeutic outcome? guideline-recommended treatments for the anticipated indication.
SYMVESSTM is a bioengineered implantable vessel that is grown from
human cells and then decellularized. The resulting SYMVESSTM
consists of extracellular matrix proteins, in the form of a
tubular blood vessel, that stimulate patient cell recruitment
after implantation. Cellular repopulation and remodeling of the
SYMVESSTM result in a living, functional part of the vasculature.
The autologous vein grafts' mechanism of action involves
biological integration, promoting natural endothelial function,
reducing thrombosis risk, and adapting to the arterial environment
through arterialization. SYMVESSTM's mechanism of action offers
several advantages: (1) reduces time to revascularization with an
off-the-shelf option; (2) avoids vein harvesting complications;
(3) provides a consistent conduit size; and (4) regenerates into a
living blood vessel.
The synthetic grafts' mechanism of action provides immediate
revascularization but does not integrate into the host and is not
remodeled by patient cells. Synthetic grafts are made of non-
biodegradable polymers that often stimulate foreign body
responses, fibrosis, and thrombosis when implanted into patients.
Lacking native extracellular matrix proteins architecture,
synthetic grafts also interact poorly with the patient's immune
system, which raises the risk of graft infection in contaminated
wound beds. SYMVESSTM, which is comprised of human extracellular
matrix proteins, repopulates with cells, has a low infection rate,
and does not stimulate fibrosis nor a foreign body reaction. The
mechanism of action of ligation is to stop blood flow through the
injured artery but without revascularization, while amputation
functions by removing part or all the injured limb to prevent
further complications and save a patient's life. SYMVESSTM offers
an alternative by providing a vessel capable of restoring blood
flow, preserving limb functionality.
Is the technology assigned to the same MS-DRG as existing Yes.................... The use of SYMVESSTM will likely be assigned to the same MS-DRGs
technologies? where existing technologies to treat significantly damaged
arteries due to traumatic injuries, are assigned.
[[Page 18144]]
Does new use of the technology involve the treatment of Yes.................... SYMVESSTM is used to treat the same type of disease in a similar
the same/similar type of disease and the same/similar patient population as existing technologies. Traumatic vascular
patient population when compared to an existing injury can be caused by motor vehicle accidents, industrial
technology? accidents, falls, gunshot wounds, knife wounds, etc. For all these
types of injuries to the extremities, if an autologous vein is
available for arterial repair, then such injuries are typically
repaired using a harvested vein from the patient. However,
regardless of the mechanism of injury, in some cases, an
autologous vein is not available, or its use is not feasible in a
given trauma situation. In some situations, there may not be
enough time to harvest the vein, or the trauma surgeon may not
have the necessary training to harvest a vein. Regardless of the
situation, the patient or the injury mechanism, SYMVESSTM is
anticipated to provide a new treatment option to patients where
revascularization using a harvested autologous vein is not
feasible. By addressing the needs of these specific patients,
SYMVESSTM expands the treatment options available for saving life
and limb following vascular trauma, ensuring better outcomes for a
broader patient population.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We have the following concerns with regard to the newness
criterion. The applicant stated that SYMVESSTM has a novel
mechanism of action based on its manufacturing, composition, and post-
operative regenerative properties. However, we are interested in more
information about how the composition of SYMVESSTM is
associated with its post-operative regenerative properties, and
specifically how these regenerative properties are associated with its
mechanism of action to achieve a therapeutic outcome, as well as how
the association between SYMVESSTM's regenerative properties
and mechanism of therapeutic action differs from that of autologous
vein grafts. In addition, we question whether physiological changes,
such as arterialization, cellular repopulation, and fibrosis, that
occur after a conduit is implanted, should be considered part of the
mechanism of action. We also note that the applicant stated that the
mechanism of action of synthetic grafts is immediate revascularization,
and we question whether that is not also the mechanism of action of
SYMVESSTM and/or autologous vein grafts.
We are inviting public comments on whether SYMVESSTM is
substantially similar to existing technologies, including whether post-
implantation physiological changes should be considered as part of a
technology's mechanism of action, and whether SYMVESSTM
meets the newness criterion.
With respect to the cost criterion, the applicant provided an
analysis to demonstrate that SYMVESSTM meets the cost
criterion. The analysis followed the order of operations summarized in
the following table.
SYMVESSTM Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes, ICD-10-PCS
codes, and MS-DRGs used by the applicant, see the cost criterion codes
and MS-DRGs attachment included in the online posting for SYMVESSTM.
Claims identified...................... 1,540 claims mapping to 90 MS-DRGs, with 18.83% of claims mapping to MS-
DRG 252 (Other Vascular Procedures with MCC).
Charges removed for prior technology... Per the applicant, use of the technology would replace other
implantable devices. The applicant removed 100% of charges for
implantable devices from the identified cases, as to take a
conservative approach in its cost analysis. The applicant did not
remove any indirect charges related to the prior technology.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application. The applicant used all relevant values reported in
the impact file posted with the FY 2025 IPPS/LTCH PPS interim final
action with comment period.
Inflation factor....................... The applicant applied an inflation factor of 12.87% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the cost
of SYMVESSTM by the national average-cost-to-charge ratio of 0.259 for
Implantable Devices from the FY 2025 IPPS/LTCH PPS final rule.
Cost analysis results.................. Average case-weighted threshold amount: $143,227.
Final inflated average case-weighted standardized charge per case:
$423,141.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount,
the applicant asserted that SYMVESSTM meets the cost
criterion.
We are inviting public comments on whether SYMVESSTM
meets the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that SYMVESSTM represents a substantial
clinical improvement over existing technologies because
SYMVESSTM is a new treatment option for patients with
extremity vascular trauma where autologous vein grafts are infeasible,
has improved secondary patency compared to synthetic grafts, and has
lower amputation and infection rates. The applicant also stated that
SYMVESSTM enables quicker perfusion of injured extremities
compared to autologous grafts, reducing ischemia time and complication
risks. The applicant provided 6 documents, including 2 studies and 2
FDA-related documents, to support these claims, as well as 10
background articles about extremity arterial trauma outcomes, trauma
surgery clinical guidelines, and the impact of repair duration on
extremity arterial injuries.\157\ The following table summarizes the
applicant's assertions regarding the
[[Page 18145]]
substantial clinical improvement criterion. Please see the online
posting for SYMVESSTM for the applicant's complete
statements regarding the substantial clinical improvement criterion and
the supporting evidence provided.
---------------------------------------------------------------------------
\157\ Background articles are not included in the following
table but can be accessed via the online posting for the technology.
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments
----------------------------------------------------------------------------------------------------------------
SYMVESSTM is the first and only Food and Drug Administration. U.S. Department of Health and Human
bioengineered blood vessel approved for Services. Grant of Regenerative Medicine Advanced Therapy
extremity vascular trauma. Designation for Human Acellular Vessel (HAV). U.S. Department of
Health and Human Services, Food and Drug Administration. Granted
May 2, 2023.
Humacyte Global, Inc. Section 2.5 Clinical Overview: Biologics
License Application 125812 for Human Acellular Vessel (HAV)
(Excerpt Clinical Data). Submitted December 2023.
Moore EE, Curi M, Namias N, et al. Bioengineered Human Arteries for
the Repair of Vascular Injuries. JAMA Surg. Published online
November 20, 2024. doi:10.1001/jamasurg.2024.4893.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
SYMVESSTM is a new treatment option for Humacyte Global, Inc, 2023, op. cit.
patients with extremity vascular trauma, Humacyte Global, Inc. ATEV Clinical Overview--Vascular Trauma
where autologous vein grafts are not Background and Cross-Population Generalizability. 2024a.
feasible. Moore, 2024, op. cit.
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Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative
to services or technologies previously available
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Conduit infection rates are lower with Moore, 2024, op. cit.
SYMVESSTM compared to synthetic grafts in Humacyte Global, Inc, 2023, op. cit.
extremity vascular trauma. Humacyte Global, Inc, 2024a, op. cit.
Humacyte. Data on File--Propensity Score Matched Analysis Results.
2024b.
Wang, J., Blalock, S.K.F., Levitan, G.S., Prichard, H.L., Niklason,
L.E., & Kirkton, R.D. (2023). ``Biological mechanisms of infection
resistance in tissue-engineered blood vessels compared to synthetic
expanded polytetrafluoroethylene grafts.'' Journal of Vascular
Surgery: Vascular Science, 4, 100120. DOI: 10.1016/
j.jvssci.2023.100120.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
SYMVESSTM results in lower amputation Humacyte Global, Inc, 2023, op. cit.
rates as compared to synthetic grafts. Humacyte Global, Inc, 2024a, op. cit.
Humacyte. 2024b, op. cit.
Moore, 2024, op. cit.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
SYMVESSTM significantly improves secondary Humacyte Global, Inc, 2023, op. cit.
patency rates as compared to synthetic Humacyte Global, Inc, 2024a, op. cit.
grafts. Humacyte. 2024b, op. cit.
Moore, 2024, op. cit.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
SYMVESSTM enables quicker reperfusion of Humacyte Global, Inc, 2023, op. cit.
injured extremities compared to Moore, 2024, op. cit.
autologous vein grafts, reducing risk of The applicant also provided background information to support this
complications and amputation. claim, which can be accessed via the online posting for the
technology.
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We also received written public comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
SYMVESSTM, which we are summarizing in this section.
Comment: Two commenters submitted comments on SYMVESSTM.
A commenter stated that SYMVESSTM has not demonstrated non-
inferiority to synthetic grafts or provided evidence for when
SYMVESSTM should be used instead of a synthetic graft in any
of what the commenter described as underpowered, non-comparative trauma
clinical trials (V005 and the V017). The commenter stated that instead
of conducting a head-to-head trial, synthetic graft benchmarks that
compared unfavorably to SYMVESSTM were used in the V005 and
V017 trials. The commenter stated that the total number of evaluable
patients was only 51 (V005) and 16 in the observational study (V017),
which was not enough to show significance. In terms of primary patency
rate, which was the primary endpoint of the V005 and V017 trials, the
commenter noted that primary patency is defined as intervention free
functionality, and that graft literature reports primary patency rates
in months to years. The commenter also noted that the applicant
reported primary patency and adverse events data at 30-day endpoints,
while most of these vascular grafts are in patients for months to
years. The commenter also expressed concern that the applicant defines
secondary patency as functionality after a thrombolytic intervention.
The commenter stated that secondary patency data can be open to
interpretation because multiple interventions may have been used to
keep SYMVESSTM open, even if the technology is not
functional. In terms of the Wang et al. (2023) study, which compared
SYMVESSTM to ePTFE grafts
[[Page 18146]]
in patients requiring a conduit for hemodialysis, the commenter stated
that 10 times more thrombotic events occurred in the
SYMVESSTM group (N=126) versus the control (arteriovenous
fistula, AVF) (N=12) group, and that there was twice as much stenosis
in the SYMVESSTM group (N=228) versus the control group
(N=115). The commenter was not supportive of approving new technology
add-on payments for SYMVESSTM.
The other commenter stated that SYMVESSTM does not
represent a meaningful improvement of the standard of care. According
to the commenter, the actual study cohort for the V005 trial was
modified. Specifically, the study enrolled 72 patients and treated 69
with SYMVESSTM on an intention-to-treat basis (ITT), and
only 51 were included in the analysis, representing an analysis on
modified intention to treat basis (mITT). According to the commenter,
the reasons given were that, of the 18 SYMVESSTM recipients
who were not included in the analysis, 16 had iatrogenic injuries and 2
had thoracic injuries. Per the commenter, the 51-patient cohort was
referred to as ITT, even though 69 actually received the product. The
commenter also stated that to its knowledge, the data of the 18
patients have never been shared. The commenter also stated that the
inclusion and exclusion criteria of the V017 trial were very different
from those of the V005 trial. Per the commenter, the V017 trial may
include patients who can be treated with either autologous veins or
SYMVESSTM, and that any limb threatening injury could be
included in the patient cohort. The commenter also noted that although
the average Injury Severity Score (ISS) between V005 and V017 were
similar (about 20.0), V017 has a much higher variance (standard
deviation [SD]=18.9) than V005 (SD=10.5). The commenter also noted that
the range of SD was not disclosed. Per the commenter, even one
extremely high ISS could skew the average up if it was otherwise low,
and that there were no exclusion criteria in V017 for ISS higher than
60. The commenter also stated that while SYMVESSTM may have
superior initial uptake in the human body than PTFE grafts, its
performance drops off significantly over time in both trauma and
dialysis. The commenter stated that in terms of long-term patency,
long-term graft studies show that after a year or two, the patency
levels off, so even 12-months or 24-months is enough to make some
highly educated guesses about the long-term patency of the product.
In terms of secondary patency, the commenter noted that the 12-
month rate for the combined samples of V005 and V017 was about 73
percent, and that, based on information from Humacyte's press release
from August 2024,\158\ the 12-month secondary patency for V017 was 87
percent. According to the commenter, since V017 had a sample size of
16, and the combined sample size was 67, this would imply that the
results from V005 were in fact much lower than those of V017. According
to the commenter, solving (((X * 51) + (0.87 * 16))/67) = 0.73 yielded
a 12-month secondary patency rate of 68.6 percent (X [ap] 0.686078) for
V005 which was much lower than 78.9 percent, the applicant's 30-day
synthetic grafts benchmark for secondary patency, and 18.4 percent
lower than the secondary patency of V017 (87 percent). According to the
commenter, the outcomes of the two trials were different, which it
described as two obviously different data set results. The commenter
speculated that the difference in the long-term outcomes of V005 and
V017 can be explained by the baseline health of the patients in each
trial. The commenter also stated that the difference in patency between
the two trials was obvious if safety signals are considered. Per the
commenter, according to the adverse event data of Moore study (2024),
the patients in the V017 trial were implicitly much healthier than
those in the V005 trial either at presentation in clinic or afterwards.
The commenter stated that it would be unlikely for the two trials to
have similar outcomes. The commenter questioned whether removing one of
the inclusion criteria in V005, that patients who received
SYMVESSTM would have to be unable to receive arteriovenous
grafts (AVG), would increase the average health of the patients.
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\158\ Humacyte presents positive long-term results in
ATEVTM in treatment of vascular trauma in military
setting of Ukraine Humanitarian Program (https://investors.humacyte.com/news-releases/news-release-details/humacyte-presents-positive-long-term-results-atevtm-treatment, accessed 1/30/
2025).
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The commenter also stated that the Moore study (2024) provided the
confidence intervals for the amputation, infection, and death rates,
but not for the ISS. Per the commenter, the mean (x) and standard
deviation (SD) for the ISS were similar for the two trials (V005:
x=20.8, SD=10.5; V017: x=20.1, SD=18.9). Per the commenter, three of
the 16 patients in V017 had no ISS reported, and that the synthetic
graft variance was much smaller (SD=2.4). According to the commenter,
per the Moore team (2024), no deaths were attributed to
SYMVESSTM.\159\ The commenter stated that overall survival
is generally not differentiated this way in the literature, and that
deaths resulting from injuries were counted as such regardless of
whether the SYMVESSTM graft was patent or not. The commenter
stated that the death rate for the two trials was 5.9 percent and zero
percent, and that the death rate for the 2 trials combined was 3.5
percent, which was higher than the 3.4 percent synthetic graft
benchmark for all-cause death. The commenter stated it believed this
was probably due to thrombotic events caused by SYMVESSTM.
The commenter also stated that the absence of p-value in the
applicant's report of trial results made it hard to tell whether those
results were due to chance.
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\159\ Moore (2024), op. cit. p. E5.
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In terms of the synthetic graft benchmarks, the commenter stated
that historical comparisons are always a last resort way to compare two
products in a clinical trial, and that it is hard to compare two trials
that were run in different sites, on different people, under different
conditions, at different periods in time. According to the commenter,
previous clinical trials for the indication of vascular trauma had
tested different technologies (autologous vein grafts, different
synthetic grafts) on different types of patients (for example, civilian
versus military) on different parts of the body for short- versus long-
term. The commenter stated that trial results may be skewed by a
historical control that performed much better or much worse than its
comparator in a previous trial. In addition, the commenter stated that
the way we treat thrombosis with post-graft drug regimens has evolved
over time, and some studies found that the use of post-surgery
prescription drugs can drastically impact outcomes. Per the commenter,
those are the reasons that it becomes challenging to evaluate graft
performance in 2024 using historical controls from 2004. The commenter
asserted that head-to-head comparison is a feasible study design in
trauma.
The commenter noted that in Fox (2005), one of the papers in the
meta-analysis of the Moore study (2024), the infection and amputation
rates for the PTFE grafts were very high, and that all of the grafts
had become infected and failed, resulting in amputation. Per the
commenter, Fox mentioned that he had only examined one-third of all the
patients, that the median ISS was 40 (range: 16-75), which, the
commenter noted, was double the average for V005 (x=20.8) and V017
(x=20.1). According
[[Page 18147]]
to the commenter, Perkins (2016), another paper in the meta-analysis,
analyzed 579 extremity injuries and showed that amputations happened
more often among those with higher ISS. Moreover, the commenter stated
that while the studies in the synthetic graft meta-analysis reported
percent of patients who received a synthetic graft, infection rate, and
amputation rate, only some reported whether the patients who received a
synthetic graft developed infection or underwent amputation as a result
of the synthetic graft. In addition, while the Moore study (2024)
reported that the meta-analysis included 281 synthetic grafts, the
commenter noted that it was unable to replicate that number. Moreover,
the commenter stated that the Rudstrom paper (2008), another study in
the meta-analysis, specifically looked at iatrogenic injuries. The
commenter questioned why patients with iatrogenic injuries were
excluded from the evaluable cohorts in the V005 and V017 trials, but
the synthetic graft benchmarks included the results of patients with
iatrogenic injuries. The commenter expressed doubt as to whether
iatrogenic injuries were excluded from the meta-analysis.
Furthermore, the commenter stated that SYMVESSTM should
be compared with Artegraft[supreg], a biological off-the-shelf solution
approved for trauma, hemodialysis, and lower extremity bypass surgeries
and owned by LeMaitre. The commenter noted that according to the
Statistical Analysis Plan for SYMVESSTM, besides the
synthetic graft benchmarks, the applicant also created a non-autologous
vein and non-synthetic graft benchmark.\160\ Per the commenter, this
benchmark has not been shared publicly, and as a result, the results of
what that benchmarking activity yielded or what the comparative to the
Artegraft[supreg] or other xenografts look like remain unclear.
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\160\ Moore et al (2024), op. cit., Supplement 6: Statistical
Analysis Plan for Systematic Literature Review and Meta-analysis.
Version 2.0 Final, 25 May 2023, p. 6.
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Regarding the Wang study (2023), the commenter stated that the
applicant did not demonstrate non-inferiority in months 18 and 24 and
therefore failed the study. According to the commenter, although
SYMVESSTM demonstrated initially superior secondary patency
and uptake in the human body, there was significant degradation over
time, which brings into question the robustness of the technology. Per
the commenter, the finding that SYMVESSTM performed worse
than ePTFE in terms of secondary patency after one year is important
because if the technology needs to be replaced more often, this
potentially introduces significant risk to the patient by needing to
undergo an additional surgery.
The commenter also added that the results from the
SYMVESSTM studies conducted in America have generally lower
secondary patency rates. Per the commenter, when interpreting the
SYMVESSTM clinical data, only the U.S. data should be
considered, especially given the large variance in the injury data and
the fact that the applicant did not exclude patients who could have
received an autologous vein graft. The commenter stated that those were
the major variables that greatly influenced the outcome of the Moore
study (2024). The commenter concluded that SYMVESSTM is
inferior to standard of care alternatives that are already approved in
trauma.
Response: We thank the commenters for their comments. After review
of the information provided by the applicant and the public comments
received in response to the New Technology Town Hall meeting, we have
the following concerns regarding whether SYMVESSTM meets the
substantial clinical improvement criterion. We note that being the
first and only bioengineered blood vessel for vascular trauma may
relate to newness but does not explain how the technology treats
patients unresponsive to or ineligible for existing treatment options.
Additionally, while the applicant stated that SYMVESSTM is a
treatment option for patients ineligible for autologous vein grafts, we
note that these patients could still receive other available treatment
options, which may include, but are not limited to: primary repair,
shunting, use of synthetic or other graft for bypass or interposition
grafting, and amputation. Therefore, it is unclear that
SYMVESSTM offers a treatment option for patients ineligible
for or unresponsive to currently available treatments.
With respect to the assertion that SYMVESSTM
significantly improves clinical outcomes relative to services or
technologies previously available, the applicant stated that
SYMVESSTM is associated with lower conduit infection and
amputation rates, and significantly improves secondary patency rates
compared to synthetic grafts. To support these claims, the applicant
provided the Moore et al. (2024) study, which compared pooled results
from two single-arm clinical trials using SYMVESSTM (V005
and V017) to synthetic graft benchmarks derived from a systematic
review and meta-analysis of literature. However, we question the
reliability and validity of the synthetic graft benchmarks against
which Moore et al. (2024) compared SYMVESSTM effects on
clinical outcomes. V005 was a prospective phase II/III trial of 69
civilian patients with vascular injuries at U.S. and Israeli level 1
trauma centers from September 2018 through June 2023. V017 was a
retrospective trial of 19 wounded war fighters and other patients from
a humanitarian program in Ukraine from June 2022 through June 2023.
Moore et al. (2024) developed the three synthetic graft benchmarks
based on a meta-analysis of 12 studies published between 2005 and
2022.161 162 163 164 165 166 167 168 169 170 171 172 Of
these 12 studies, 7 used samples of
[[Page 18148]]
soldiers from the wars in Iraq and Afghanistan and 5 used samples of
civilians in the U.S., Trinidad and Tobago, and Sweden. We note that
these 12 studies were conducted using different trial designs, patient
samples with different baseline demographic and clinical attributes,
and during a long period of time when innovations and guidelines for
management of extreme arterial injury continued to emerge and evolve.
In addition, these studies used different inclusion and exclusion
criteria for injury types and followed different documentation
protocols for details about injuries. Furthermore, they implemented
different treatments based on different surgical decisions, including
Dacron or PTFE synthetic grafts, primary repair, shunting, oversew,
reversed vein, or amputation. Half of these studies conducted follow-up
periods on clinical outcomes, ranging from 36 days to 10 years. We are
concerned that not accounting for these differences in the meta-
analysis may confound the results on clinical outcomes and limit the
reliability of the comparison between SYMVESSTM and
synthetic grafts. In addition, more than half (N=7) of the 12 studies
were published before 2019 and we question whether the meta-analysis
sufficiently accounts for more recent advances in post-graft drug
therapy and other recent advances in treatments for extremity vascular
trauma. Moreover, we are concerned about whether there is any empirical
evidence that the three synthetic graft benchmarks reflect the clinical
outcomes that patients would attain if they have received guideline-
based care for extremity vascular trauma. We note that none of the 12
studies made claims regarding the association between guideline-based
implementation of synthetic graft treatments and extremity vascular
trauma outcomes. Also, in 9 of the 12 studies, the number of synthetic
graft recipients ranged from 3 to 16. We question if these samples were
sufficiently powered to detect statistically significant and clinically
meaningful differences between synthetic grafts and comparators on
clinical outcomes. As previously discussed, only half of the 12 studies
conducted follow up on clinical outcomes; however, none indicated
whether the patients who received synthetic grafts remained in the
trial throughout the follow-up periods. Consequently, we are interested
in additional information on the reliability and validity of Moore et
al. (2024) study's synthetic graft benchmarks, which were developed
based on 12 studies with heterogeneous study designs, injury types,
interventions, and follow-up protocols. Additionally, we note that the
patient samples in the V005 and V017 trials may not be comparable to
those in the 12 studies. We are interested in whether and how the
differences, such as the availability of treatments and standard of
care, between the V005 trial's SYMVESSTM recipients and the
12 studies' patient populations were accounted for in the meta-analysis
and interpretation of the clinical outcomes of the Moore et al. (2024)
study.
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\161\ Fox, C.J., Gillespie, D.L., O'Donnell, S.D., Rasmussen,
T.E., Goff, J.M., Johnson, C.A., Galgon, R.E., Sarac, T.P., & Rich,
N.M. (2005). Contemporary management of wartime vascular trauma.
Journal of Vascular Surgery, 41(4), 638-644. https://doi.org/10.1016/j.jvs.2005.01.010.
\162\ Laverty, R.B., Brock, S.G., Walters, T.J., & Kauvar, D.S.
(2021). Outcomes of Arterial Grafts for the Reconstruction of
Military Lower Extremity Arterial Injuries. Annals of Vascular
Surgery, 76, 59-65. https://doi.org/10.1016/j.avsg.2021.03.006.
\163\ Lin CH, Consuegra MDL, Lin TS, Revisiting Management
Strategies for Popliteal Artery Injuries. Ann Plast Surg. 2022 Mar
1;88(1s Suppl 1):S44-S49.
\164\ Perkins ZB, Yet B, Glasgow S, Marsh DWR, Tai NRM,
Rasmussen TE, Long-term, patient-centered outcomes of lower-
extremity vascular trauma. J Trauma Acute Care Surg. 2018 Jul;85(1S
Suppl 2):S104-S111.
\165\ Ramdass, M.J., & Harnarayan, P. (2017). A decade of major
vascular trauma: Lessons learned from gang and civilian warfare.
Annals of the Royal College of Surgeons of England, 99(1), 70-75.
https://doi.org/10.1308/rcsann.2016.0296.
\166\ Rayamajhi S, Murugan N, Nicol A, et al. Penetrating
femoral artery injuries: an urban trauma centre experience. Eur J
Trauma Emerg Surg 2019 Oct;45(5):909-917.
\167\ Rudstr[ouml]m H, Bergqvist D, Ogren M, Bj[ouml]rck M,
Iatrogenic vascular injuries in Sweden. A nationwide study 1987-
2005. Eur J Vasc Endovasc Surg. 2008 Feb;35(2):131-8.
\168\ Sharrock AE, Tai N, Perkins Z, et al. Management and
outcome of 597 wartime penetrating lower extremity arterial injuries
from an international military cohort. J Vasc Surg. 2019
Jul;70(1):224-232.
\169\ Stonko DP, Betzold RD, Abdou H, et al. AAST PROOVIT Study
Group. In-hospital outcomes in autogenous vein versus synthetic
graft interposition for traumatic arterial injury: A propensity-
matched cohort from PROOVIT. J Trauma Acute Care Surg. 2022 Feb
1;92(2):407-412.
\170\ Urrechaga E, Jabori S, Kang N, et al. Traumatic Lower
Extremity Vascular Injuries and Limb Salvage in a Civilian Urban
Trauma Center. Ann Vasc Surg. 2022 May;82:30-40.
\171\ Vertrees A, Fox CJ, Quan RW, Cox MW, Adams ED, Gillespie
DL, The use of prosthetic grafts in complex military vascular
trauma: a limb salvage strategy for patients with severely limited
autologous conduit. J Trauma. 2009 Apr;66(4):980-3.
\172\ Watson JD, Houston R 4th, Morrison JJ, Gifford SM,
Rasmussen TE, A retrospective cohort comparison of expanded
polytetrafluorethylene to autologous vein for vascular
reconstruction in modern combat casualty care. Ann Vasc Surg.
2015;29(4):822-9.
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We further note that the Moore et al. (2024) study also combined
the results of the V005 and V017 trials for comparison to the synthetic
grafts benchmarks, and we question whether the combined results can be
generalized to the Medicare population. In the combined sample (N=67),
the 51 civilian patients of the V005 trial accounted for 76 percent of
the combined total, while the 16 military patients of the V017 trial
accounted for 24 percent of the combined total. We question whether the
combined results can be extrapolated to a civilian or military
population. In addition, we note that while the average age of both of
the trials' patient populations were comparable (V005: 33.5 years;
V017: 34.2 years); they differed in the distribution of a number of
variables, including the types of injuries and trauma. As a result, we
question whether it is appropriate to combine the results from these
trials, and whether any outcomes from the trials are generalizable to
the Medicare population, which may have a different distribution of
various types of injuries and trauma. We also note that the applicant
acknowledged the lack of Medicare-aged study participants in the Moore
et al. (2024) study, and stated that the proportion (3 percent) of
Medicare-aged patients in the V005 and V017 clinical trials was
comparable to that in clinical databases (4.6 percent in the National
Trauma Data Bank[supreg] (NTDB[supreg]) and 4.5 percent in the
PROspective Observational Vascular Injury Trial (PROOVIT) registry).
According to the applicant, the V005 and V017 trials included two
patients at least 65 years of age who experienced vascular or extremity
trauma (Humacyte Global, Inc., 2023). The applicant compared the
percent of SYMVESSTM recipients 65 years of age or older
with that of trauma patients in the PROOVIT registry, which includes
data of vascular injuries from 14 level 1 or 2 trauma centers in the
U.S. since February 2013 (DuBose et al., 2015).\173\ According to the
applicant, the PROOVIT registry included 47 patients who were 65 years
of age or older and had vascular or extremity trauma. Both of the
SYMVESSTM patients over the age of 65 in the V005 and V017
trials had lower extremity trauma but no upper extremity trauma. In
comparison, 43 percent of the patients in the PROOVIT registry had
lower extremity trauma, and 57 percent had upper extremity trauma.
Therefore, we continue to question whether the findings of the V005 and
V017 trials are generalizable to the Medicare population.
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\173\ DuBose JJ, Savage SA, and Fabian TC, et al. (2015). The
American Association for the Surgery of Trauma PROspective
Observation Vascular Injury Treatment (PROOVIT) registry:
Multicenter data on modern vascular injury diagnosis, management,
and outcomes. Journal of Trauma and Acute Care Surgery 78(2).
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We are also concerned that the sample sizes of the 2 trials in the
Moore et al. (2024) study were too small to ensure that the estimates
for clinical outcomes were reliable, as the V017 trial included only 16
cases and the V005 trial included 51. We note that the sample size for
the V005 trial was calculated for analyzing 30-day patency rate, which
was the primary endpoint of the trial.\174\ The Moore team estimated
that at least 40 cases would be needed to yield sufficient power for
the testing of patency rate at 30 days after implant. However, whether
a sample size yields sufficient power depends partly on the effect
size, that is, the difference in outcomes between subjects receiving
treatments versus control that is statistically significant and
clinically meaningful. We question whether, due to the sample size for
the V005 trial, the study findings with respect to patency, infections,
amputations, and death are sufficient to support that the technology
provides a substantial clinical improvement over existing technologies
with respect to these outcomes.
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\174\ Moore (2024), op.cit. Supplement #2, Statistical Analysis
Plan for CLO-PRO-V005, Version 8. p. 10.
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Moreover, we note that there are differences in the outcome data
for the V005 trial in the Moore (2024) study and the
SYMVESSTM United States Prescribing Information (USPI).\175\
We note that the USPI reports clinical outcomes for the two trials
separately and does not present the combined outcomes. We also note
that the clinical outcomes data for V017 are identical between the
Moore study (2024) and Section 14, Clinical Studies, of the
[[Page 18149]]
USPI. For the V005 trial, the Moore study (2024) reported the primary
patency rate as 84.3 percent (43/51),\176\ and the USPI 66.7 percent
(36/54).\177\ Thus for primary patency, SYMVESSTM exceeded
the synthetic graft benchmark (78.9 percent) according to the Moore
study, but not according to the USPI. In terms of secondary patency,
the Moore study (2024) reported the rate as 90.2 percent (46/51), the
USPI 72.2 percent (39/54). Therefore, for secondary patency,
SYMVESSTM exceeded the synthetic grafts benchmarks according
to the Moore study (2024), but not according to the USPI. In terms of
amputation, the Moore study (2024) reported the 30-day rate as 9.8
percent (5/51), the USPI reported 30-day limb salvage rate as 75.9
percent (41/54), or 24.1 percent (13/54) in terms of 30-day amputation
rate. In terms of limb salvage, therefore, SYMVESSTM's
performance exceeded the synthetic graft benchmark (24.3 percent)
according to the Moore study (2024), and was comparable according to
the USPI. Also, while the Moore study (2024) reported a 30-day all-
cause mortality rate (5.9 percent), which was higher than the
corresponding synthetic grafts benchmark (3.4 percent), the USPI does
not provide any mortality rates. Given the variation by data source as
to whether SYMVESSTM performed better than the synthetic
grafts benchmarks for primary and secondary patency and amputation
rates, we question the applicant's assertion of clinical improvement
compared to synthetic grafts.
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\175\ Humacyte Global, Inc. SYMVESS USPI [Package Insert].
(Revised 12/2024). Available at: https://www.fda.gov/media/184625/download?attachment.
\176\ Moore (2024), op. cit., Table 2.
\177\ SYMVESS USPI, op. cit. Table 2.
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Regarding Wang et al. (2023), a prospective, multicenter, phase III
randomized clinical trial comparing the effects of SYMVESSTM
to that of synthetic ePTFE grafts as an arteriovenous conduit for
hemodialysis access in patients with ESRD, we note that the study
sample did not assess patients with vascular trauma, and both arms were
made up of dialysis patients, who are in general immunocompromised and
have comorbidities, unlike trauma patients.\178\ The differences in
clinical profiles between ESRD and trauma patients may confound the
difference between the two groups in conduit-related infection rate,
limb salvage rate, and other graft-related clinical outcomes. While the
applicant provided this study to demonstrate that SYMVESSTM
provides improved infection rate compared to synthetic grafts, we
question the extent to which the infection rates of
SYMVESSTM in ESRD patients can be extrapolated to patients
with extreme arterial injury, for which the technology is indicated.
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\178\ U.S. Centers for Disease Control and Prevention. (2023,
May 11). People Who Are Immunocompromised: Know how to protect
yourself and what to do if you get sick. U.S. Department of Health
and Human Services, Centers for Disease Control and Prevention.
https://archive.cdc.gov/www_cdc_gov/coronavirus/2019-ncov/need-extra-precautions/people-who-are-immunocompromised.html.
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We also note that while the applicant provided studies comparing
SYMVESSTM to synthetic grafts to demonstrate improved
outcomes, we remain unclear about how the clinical outcomes of
SYMVESSTM recipients compare to those who receive other
currently available treatments for extremity vascular trauma, like
cryopreserved human grafts or xenografts. We would be interested in
additional evidence comparing SYMVESSTM and these grafts in
order to inform our assessment of substantial clinical improvement over
existing technologies.
Lastly, we question the applicant's claim that SYMVESSTM
enables quicker reperfusion of injured extremities compared to
autologous vein grafts which reduces the risk of complications.
According to the indication, SYMVESSTM is used when
autologous vein graft is not feasible. Thus, SYMVESSTM would
not be an alternative for nor comparable to autologous vein grafts. We
welcome clarification or further information about this claim.
We are inviting public comments on whether SYMVESSTM
meets the substantial clinical improvement criterion.
m. TECELRA[supreg] (Afamitresgene Autoleucel)
Adaptimmune, LLC submitted an application for new technology add-on
payments for TECELRA[supreg] for FY 2026. According to the applicant,
TECELRA[supreg] is a melanoma-associated antigen A4 (MAGE-A4)-directed
genetically modified autologous T-cell immunotherapy (also referred to
as an autologous T-cell receptor (TCR) therapy) indicated for the
treatment of adults with unresectable or metastatic synovial sarcoma
who have received prior chemotherapy, are HLA-A*02 subtype positive,
and whose tumor expresses the MAGE-A4 antigen. Per the applicant,
TECELRA[supreg] is composed of T cells genetically modified to express
affinity-enhanced TCRs specific to the MAGE-A4 protein, which is
expressed by synovial sarcoma tumor cells at varying frequencies.
Please refer to the online application posting for TECELRA[supreg],
available at https://mearis.cms.gov/public/publications/ntap/NTP241004LTDY2, for additional detail describing the technology and the
disease treated by the technology.
With respect to the newness criterion, according to the applicant,
TECELRA[supreg] was granted BLA accelerated approval from FDA on August
1, 2024 for treatment of adults with unresectable or metastatic
synovial sarcoma who have received prior chemotherapy; are HLA-
A*02:01P, HLA-A*02:02P, HLA-A*02:03P, or HLA-A*02:06P positive; and
whose tumor expresses the MAGE-A4 antigen as determined by FDA-approved
or cleared companion diagnostic devices. Per the applicant,
TECELRA[supreg] was commercially available immediately after receiving
FDA marketing authorization. The applicant stated that TECELRA[supreg]
is a single, one-time, patient-specific treatment delivered as an
intravenous infusion containing 2.68 x 10\9\ to 10 x 10\9\ MAGE-A4 TCR
positive T-cells, in one or more infusion bag(s).
The applicant stated that, effective October 1, 2022, the following
ICD-10-PCS codes may be used to uniquely describe procedures involving
the use of TECELRA[supreg]: XW03368 (Introduction of afamitresgene
autoleucel immunotherapy into peripheral vein, percutaneous approach,
new technology group 8) or XW04368 (Introduction of afamitresgene
autoleucel immunotherapy into central vein, percutaneous approach, new
technology group 8).
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that TECELRA[supreg] is not substantially similar to other
currently available technologies because TECELRA[supreg] is the first
FDA-approved engineered TCR T-cell therapy with a unique mechanism of
action that is distinct from that of other marketed therapeutic
products, the only therapy approved for synovial sarcoma assigned to
MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-Cell and Other
Immunotherapies), and the only therapy studied specifically in the
synovial sarcoma patient population and FDA-approved specifically for
the treatment of synovial sarcoma. Therefore, according to the
applicant, the technology meets the newness criterion. The following
table summarizes the applicant's assertions
[[Page 18150]]
regarding the substantial similarity criteria. Please see the online
application posting for TECELRA[supreg] for the applicant's complete
statements in support of its assertion that TECELRA[supreg] is not
substantially similar to other currently available technologies.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... TECELRA[supreg]'s mechanism of action is distinct from that of
action to achieve a therapeutic outcome? other marketed therapeutic products. TECELRA[supreg] is a type of
adoptive cell therapy, which are innovative cancer immunotherapies
that involve collecting lymphocytes (white blood cells, or
peripheral blood mononuclear cells) from the patient for the
purpose of genetically modifying and expanding the lymphocytes to
improve their tumor-fighting capabilities before returning the re-
engineered cells to the patient. Although CAR T-cell therapies are
also adoptive cell therapies, their mechanism of action is
different compared to TCR T-cell therapies such as
TECELRA[supreg]. Specifically, CAR T-cell therapies use an
antibody-derived single-chain antibody-variable fragment (scFv)
that recognizes cell surface antigens. By contrast, TCR T-cell
therapies recognize a specific peptide presented at the cancer
cell surface as peptide-HLA complexes. TECELRA[supreg] is
comprised of T cells that have hypervariable CDRs modified to
express affinity to the MAGE-A4 protein, which is expressed in
certain solid tumors at varying frequencies. TECELRA[supreg] is
the first and only FDA-approved MAGE-A4 targeted therapy of any
kind. Although other therapies are utilized for the treatment of
patients with unresectable or metastatic synovial sarcoma who have
received prior chemotherapy, pazopanib (VOTRIENT), a small
molecule antiangiogenic tyrosine kinase inhibitor, is the only
agent indicated for second-line (2L) treatment of soft tissue
sarcoma (STS).
Is the technology assigned to the same MS-DRG as existing No..................... As reflected in the FY 2025 Medicare IPPS Final Rule, CMS assigned
technologies? TECELRA[supreg]'s unique ICD-10-PCS codes (XW03368 (Introduction
of afamitresgene autoleucel immunotherapy into peripheral vein,
percutaneous approach, new technology group 8) and XW04368
(Introduction of afamitresgene autoleucel immunotherapy into
central vein, percutaneous approach, new technology group 8)) to
MS-DRG 018 (Chimeric Antigen Receptor (CAR) T-Cell and Other
Immunotherapies). TECELRA[supreg] is the only therapy approved for
synovial sarcoma assigned to MS-DRG 018 and the only TCR T-cell
therapy assigned to MS-DRG 018. Other technologies assigned to MS-
DRG 018 do not treat synovial sarcoma and have different
mechanisms of action.
Does new use of the technology involve the treatment of No..................... TECELRA[supreg] is the first FDA-approved engineered TCR T-cell
the same/similar type of disease and the same/similar therapy and the only therapy specifically studied in and approved
patient population when compared to an existing for synovial sarcoma patients. Synovial sarcoma is a specific form
technology? of STS and is a rare disease that tends to occur in younger
individuals, with a median age of initial clinical presentation
being in the third decade of life. Prior to TECELRA[supreg], there
were no FDA-approved therapies specifically for the treatment of
synovial sarcoma. Pazopanib was studied in broader STS populations
that included a subgroup of patients with synovial sarcoma (less
than 10% of patients) but was not approved by FDA specifically for
the treatment of synovial sarcoma. No other technology is
specifically indicated for the treatment of adult patients with
synovial sarcoma. To the extent other therapies are used for the
treatment of synovial sarcoma off-label consistent with National
Comprehensive Cancer Network (NCCN) clinical guidelines, synovial
sarcoma patients were mere subpopulations of a larger STS subject
pool across multiple histologies and without formal a priori
subgroup efficacy analyses. Thus, we know of no studies in which
synovial sarcoma patients were the focus population to determine
safety and efficacy of the treatments.
--------------------------------------------------------------------------------------------------------------------------------------------------------
We note that the applicant stated that TECELRA[supreg] is the only
FDA-approved therapy specifically studied and approved for patients
with synovial sarcoma, therefore, it does not involve the treatment of
a similar type of disease or patient population as existing
technologies. While the applicant stated that other therapies in the
National Comprehensive Cancer Network Clinical Practice Guidelines
(NCCN Guidelines[supreg]), such as pazopanib, are indicated for use in
the broader STS population rather than specifically for synovial
sarcoma, we note that synovial sarcoma is a type of STS. Consequently,
we question whether existing treatments indicated for STS, which can be
used for the treatment of specific subtypes of STS such as synovial
sarcoma, would treat the same or similar patient population as
TECELRA[supreg].
We are inviting public comments on whether TECELRA[supreg] is
substantially similar to existing technologies and whether
TECELRA[supreg] meets the newness criterion.
With respect to the cost criterion, the applicant provided four
analyses to demonstrate that TECELRA[supreg] meets the cost criterion.
Each analysis followed the order of operations summarized in the
following table.
TECELRA[supreg] Cost Analysis
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Inclusion/exclusion criteria........... For the Inclusion/Exclusion criteria used in the Cost Analysis,
including the data source and lists of ICD-10-CM codes and MS-DRGs
used by the applicant, see the cost criterion codes and MS-DRGs
attachment included in the online posting for TECELRA[supreg].
[[Page 18151]]
Claims identified...................... Scenario 1: 1,123 claims mapping to MS-DRG 018 (Chimeric Antigen
Receptor (CAR) T-Cell and Other Immunotherapies).
Scenario 2: 374 claims mapping to MS-DRG 018 (Chimeric Antigen Receptor
(CAR) T-Cell and Other Immunotherapies).
Scenario 3: 374 claims mapping to MS-DRG 018 (Chimeric Antigen Receptor
(CAR) T-Cell and Other Immunotherapies).
Scenario 4: 2,174 claims mapping to 37 MS-DRGs, with 10.81% of claims
mapping to MS-DRG 464 (Wound Debridement and Skin Graft Except Hand
for Musculoskeletal System and Connective Tissue Disorders with CC).
Charges removed for prior technology... Scenarios 1-3: Per the applicant, claim charges for cell and gene
therapy products were removed when they were reported on the claims.
For all other claims, the applicant removed the total drug charges
from the claims. The applicant stated that removing all drugs charges
is an overestimate of charges needing to be removed.
Scenario 4: Per the applicant, no prior technology charges were removed
since these cases likely do not include any high-cost therapies like
MS-DRG 018 does.
The applicant did not remove indirect charges related to the prior
technology in all four scenarios.
Standardized charges................... The applicant used the standardization formula provided in Appendix A
of the application.
Inflation factor....................... The applicant applied an inflation factor of 8.406% to the standardized
charges, based on the inflation factor used to calculate outlier
threshold charges in the FY 2025 IPPS/LTCH PPS final rule.
Charges added for the new technology... The applicant added charges for the new technology by dividing the
wholesale acquisition cost of the new technology by the national
average cost-to-charge ratio of 0.178 for Drugs and Cellular Therapies
from the FY 2025 IPPS/LTCH PPS final rule. The applicant did not add
indirect charges related to the new technology.
Cost analysis results.................. Average case-weighted threshold amount: $1,554,026.
Final inflated average case-weighted standardized charge per case:
--Scenario 1: $4,286,667.
--Scenario 2: $4,383,746.
--Scenario 3: $4,207,244.
--Scenario 4: $4,186,358.
----------------------------------------------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
all four scenarios, the applicant asserted that TECELRA[supreg] meets
the cost criterion.
We are inviting public comments on whether TECELRA[supreg] meets
the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that TECELRA[supreg] represents a substantial
clinical improvement over existing technologies because TECELRA[supreg]
is the first and only FDA-approved therapy for eligible patients with
unresectable or metastatic synovial sarcoma; is a new treatment option
for eligible patients with unresectable or metastatic synovial sarcoma,
who are unresponsive to existing systemic therapies after first-line
(1L) progression; offers significant clinical improvement in overall
response rate (ORR) and overall survival (OS) compared to existing
therapies; and is well-tolerated with a manageable safety profile. The
applicant provided 1 published study, TECELRA[supreg]'s prescribing
information, and an FDA press release to support these claims, as well
as 15 background articles about TCR T-cell therapies, expression of
MAGE-A4 in tumors, the prevalence of HLA-A subtypes, other 2L synovial
sarcoma treatments, and the burden of illness for patients with
synovial sarcoma and myxoid/round cell liposarcoma (MRCLS).\179\ The
following table summarizes the applicant's assertions regarding the
substantial clinical improvement criterion. Please see the online
posting for TECELRA[supreg] for the applicant's complete statements
regarding the substantial clinical improvement criterion and the
supporting evidence provided.
---------------------------------------------------------------------------
\179\ Background articles are not included in the following
table but can be accessed via the online posting for the technology.
----------------------------------------------------------------------------------------------------------------
Applicant statements in support Supporting evidence provided by the applicant
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a treatment option for a patient population
unresponsive to, or ineligible for, currently available treatments
----------------------------------------------------------------------------------------------------------------
TECELRA[supreg] is the first and only FDA Press Release. FDA Approves First Gene Therapy to Treat Adults with
FDA-approved engineered TCR T-cell Metastatic Synovial Sarcoma. August 2, 2024. Available from: https://
therapy. www.fda.gov/news-events/press-announcements/fda-approves-first-gene-
therapy-treat-adults-metastatic-synovial-sarcoma.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
TECELRA[supreg] is the first and only U.S. Food and Drug Administration, 2024, op. cit.
FDA-approved therapy for patients with The applicant also provided background information to support this
unresectable or metastatic synovial claim, which can be accessed via the online posting for the
sarcoma. technology.
[[Page 18152]]
TECELRA[supreg] is a new treatment D'Angelo SP, Araujo DM, Abdul Razak AR, et al. Afamitresgene autoleucel
option for patients with unresectable/ for advanced synovial sarcoma and myxoid round cell liposarcoma
metastatic synovial sarcoma, (SPEARHEAD-1): an international, open-label, phase 2 trial (2024):
unresponsive to existing systemic Lancet 403;10435:1460-1471.
therapies after first-line progression TECELRA [package insert]. Philadelphia, PA: Adaptimmune, LLC; 2024.
due to limited effectiveness, ORRs and The applicant also provided background information to support this
OS. claim, which can be accessed via the online posting for the
technology.
----------------------------------------------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology significantly improves clinical outcomes relative
to services or technologies previously available
----------------------------------------------------------------------------------------------------------------
TECELERA[supreg] offers a significant D'Angelo, 2024, op. cit.
clinical improvement in ORR and OS as Adaptimmune, 2024, op. cit.
compared to existing therapies. The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
TECELERA[supreg] is well tolerated and D'Angelo, 2024, op. cit.
has a manageable safety profile. Adaptimmune, 2024, op. cit.
The applicant also provided background information to support this
claim, which can be accessed via the online posting for the
technology.
----------------------------------------------------------------------------------------------------------------
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
TECELRA[supreg].
After review of the supporting evidence provided by the applicant,
we have the following concerns regarding whether TECELRA[supreg] meets
the substantial clinical improvement criterion. With respect to the
assertion that TECELRA[supreg] offers a treatment option for a patient
population unresponsive to, or ineligible for, currently available
treatments, we note that TECELRA[supreg] being the first approved TCR
therapy may relate to mechanism of action under the newness criterion,
but is not relevant to the demonstration of substantial clinical
improvement. Further, while the applicant stated that TECELRA[supreg]
is the first and only therapy approved specifically for patients with
unresectable or metastatic synovial sarcoma, we note that synovial
sarcoma is a subtype of the broader STS group. According to the
applicant, there were no therapies approved by the FDA specifically for
synovial sarcoma, and pazopanib and trabectedin are two therapies that
may be used to manage synovial sarcoma in subsequent-line settings.
However, according to the NCCN Clinical Guidelines[supreg] for STS,
there are other available treatments that treat advanced and metastatic
STS, including synovial sarcoma, which include pazopanib and
trabectedin. Therefore, we question whether the applicant's claim
supports that TECELRA[supreg] offers a treatment option for a patient
population unresponsive to, or ineligible for, currently available
treatments given there are other available treatments for patients with
STS that would also treat patients with unresectable or metastatic
synovial sarcoma. In addition, while the applicant stated that
TECELRA[supreg] is a new treatment option for patients with
unresectable or metastatic synovial sarcoma unresponsive to existing
systemic therapies after previous 1L treatments such as anthracycline-
based or ifosfamide-based therapy due to limited effectiveness, ORR,
and OS, it is unclear whether this patient population is unresponsive
to or ineligible for other existing treatments such as trabectedin, in
which higher response rates of 27-51% have been reported.\180\ We note
that while patients in the SPEARHEAD-1 study received multiple previous
lines of systemic therapy, the study did not list these therapies while
noting that bridging therapy, including pazopanib, trabectedin,
ifosfamide, or doxorubicin, was permissible between leukapheresis and
lymphodepletion at the investigators' discretion. Therefore, we
question whether TECELRA[supreg] offers a treatment for a patient
population unresponsive to, or ineligible for, currently available
treatments.
---------------------------------------------------------------------------
\180\ Takahashi M, Takahashi S, Araki N, et al. Efficacy of
trabectedin in patients with advanced translocation-related
sarcomas: pooled analysis of two phase II studies. Oncologist 2017;
22: 979-88.
---------------------------------------------------------------------------
With regard to the claim that TECELRA[supreg] offers a significant
clinical improvement in ORR and OS compared to existing therapies, the
applicant provided the SPEARHEAD-1 phase II clinical trial (D'Angelo et
al., 2024), which assessed TECELRA[supreg]'s efficacy in 44 patients
(aged 16 to 75 years) with metastatic or unresectable synovial sarcoma
who previously received at least 1 prior line of anthracycline-
containing or ifosfamide-containing chemotherapy. The SPEARHEAD-1 study
found that synovial sarcoma patients treated with TECELRA[supreg] had
an ORR of 39 percent and a median OS (mOS) of 16.9 months. According to
the applicant, the study demonstrated a higher ORR and longer mOS than
those from historical studies with pazopanib (18.9 percent, 10.3
months), trabectedin (12.3 percent, 10.4 months), gemcitabine/docetaxel
(4.5-5.0 percent, 8.4-14 months), and regorafenib (8 percent, 13.4
months).181 182 183 184 The applicant also stated that,
although listed in the NCCN Clinical Guidelines[supreg] for STS,
eribulin, dacarbazine, temozolomide, and vinorelbine have not been
adequately studied in previously treated unresectable or metastatic
synovial sarcoma patients, and therefore, their effectiveness for this
patient population cannot be determined (NCCN, 2024). However, we note
that patients with unresectable or metastatic synovial sarcoma treated
with TECELRA[supreg] demonstrated a mOS of
[[Page 18153]]
16.9 months, which is similar to the historical benchmark results from
patients treated with gemcitabine/docetaxel (8.4 to 14 months) and
regorafenib (13.4 months). In addition, we note that the mOS for
SPEARHEAD-1 non-responders was comparable to existing therapies, and we
question whether the baseline characteristics of the study population,
such as biomarkers of resistance to TECELRA[supreg] rather than the
treatment itself, may account for the observed survival outcomes.
Furthermore, we note that TECELRA[supreg] is indicated for patients
with tumors expressing the MAGE-A4 tumor antigen, and we question
whether the provided historical benchmark results for other treatments
in which study participants were not tested for biomarkers, such as
MAGE-A4, may represent different target populations from that of
TECELRA[supreg]. Finally, we note that the applicant compared the
clinical outcomes from the SPEARHEAD-1 study to historical controls
without appropriate statistical adjustments to account for differences
in study designs. We question whether these differences may introduce
confounders which could reduce the validity of the results of the
comparison.
---------------------------------------------------------------------------
\181\ Carroll, C., Patel, N., Gunsoy, N.B., Stirnadel-Farrant,
H.A., & Pokras, S. (2022). Meta-analysis of pazopanib and
trabectedin effectiveness in previously treated metastatic synovial
sarcoma (second-line setting and beyond). Future Oncology, 18(32),
3651-3665. https://doi.org/10.2217/fon-2022-0348.
\182\ Pender, A., Davis, E.J., Chauhan, D., Messiou, C., Al-
Muderis, O., Thway, K., . . . & Jones, R.L. (2018). Poor treatment
outcomes with palliative gemcitabine and docetaxel chemotherapy in
advanced and metastatic synovial sarcoma. Medical Oncology, 35, 1-5.
https://doi.org/10.1007/s12032-018-1193-5.
\183\ Tansir, G., Rastogi, S., Kumar, A., Barwad, A., Mridha,
A.R., Dhamija, E., . . . & Bhoriwal, S. (2023). A phase II study of
gemcitabine and docetaxel combination in relapsed metastatic or
unresectable locally advanced synovial sarcoma. BMC Cancer, 23(1),
639. https://doi.org/10.1186/s12885-023-11099-4.
\184\ Mir, O., Brodowicz, T., Italiano, A., Wallet, J., Blay,
J.Y., Bertucci, F., . . . & Penel, N. (2016). Safety and efficacy of
regorafenib in patients with advanced soft tissue sarcoma
(REGOSARC): a randomised, double-blind, placebo-controlled, phase 2
trial. The Lancet Oncology, 17(12), 1732-1742. https://doi.org/10.1016/S1470-2045(16)30507-1.
---------------------------------------------------------------------------
With respect to the claim that TECELRA[supreg] is well-tolerated
and has a manageable safety profile, the applicant stated that the
SPEARHEAD-1 clinical trial found that 75 percent of patients
experienced cytokine release syndrome (CRS), with only one patient
experiencing grade >=3 CRS, and one patient experienced symptoms
consistent with grade 1 immune effector cell-associated neurotoxicity
syndrome (ICANS). The applicant stated that, compared to CAR T-cell
therapies, the CRS associated with TECELRA[supreg] is modest
(Tsimberidou et al., 2021). However, we are unclear why the applicant
compared the safety profile of TECELRA[supreg] to CAR T-cell therapies
(which are not approved for use in STS) rather than other available
therapies that treat unresectable or metastatic synovial sarcoma.
Therefore, we are interested in evidence comparing TECELRA[supreg]'s
safety profile to other, non-CAR T-cell treatments for unresectable or
metastatic synovial sarcoma. The applicant also stated that because
TECELRA[supreg] is a single administration, recipients are less likely
to experience repeated adverse events from the infusion compared to
treatments requiring multiple/regular continuous or cyclical
administrations; however, we question the basis for this claim as the
applicant did not provide any supporting evidence.
We are inviting public comments on whether TECELRA[supreg] meets
the substantial clinical improvement criterion.
n. ZIIHERA[supreg] (Zanidatamab-hrii)
Jazz Pharmaceuticals, Inc. submitted an application for new
technology add-on payments for ZIIHERA[supreg] for FY 2026. According
to the applicant, ZIIHERA[supreg] is a bispecific human epidermal
growth factor receptor 2 (HER2)-directed antibody for the treatment of
adults with previously treated, unresectable or metastatic HER2-
positive (IHC 3+) biliary tract cancer (BTC).
Please refer to the online application posting for ZIIHERA[supreg],
available at https://mearis.cms.gov/public/publications/ntap/NTP240925MW5YD, for additional detail describing the technology and the
disease treated by the technology.
With respect to the newness criterion, according to the applicant,
ZIIHERA[supreg] was granted BLA approval from FDA on November 20, 2024,
for the treatment of adults with previously treated, unresectable or
metastatic HER2-positive (IHC 3+) BTC as detected by an FDA-approved
test. According to the applicant, ZIIHERA[supreg]'s market availability
was delayed to allow for final packaging with FDA approved labels and
package inserts as well as to allow time for shipment to channel
distribution points, therefore, ZIIHERA[supreg] became commercially
available as of December 2, 2024. We are interested in additional
information regarding the cause of any delay in the technology's
commercial availability, such as related to packaging and shipment to
channel distribution points.
According to the applicant, ZIIHERA[supreg] is administered
intravenously in doses of 20 mg/kg once every 2 weeks until disease
progression or unacceptable toxicity; therefore, the dose per inpatient
stay is 1,400 mg.
The applicant stated that effective October 1, 2024, the following
ICD-10-PCS codes may be used to uniquely describe procedures involving
the use of ZIIHERA[supreg]: XW033CA (Introduction of zanidatamab
antineoplastic into peripheral vein, percutaneous approach, new
technology group 10) or XW043CA (Introduction of zanidatamab
antineoplastic into central vein, percutaneous approach, new technology
group 10). The applicant stated that C22.1 (Intrahepatic bile duct
carcinoma), C23 (Malignant neoplasm of gallbladder), C24.0 (Malignant
neoplasm of extrahepatic bile duct), C24.8 (Malignant neoplasm of
overlapping sites of biliary tract), C24.9 (Malignant neoplasm of
biliary tract, unspecified); or Z51.11 (Encounter for antineoplastic
chemotherapy) may be used to currently identify the indication for
ZIIHERA[supreg] under the ICD-10-CM coding system.
As previously discussed, if a technology meets all three of the
substantial similarity criteria under the newness criterion, it would
be considered substantially similar to an existing technology and would
not be considered ``new'' for the purpose of new technology add-on
payments.
With respect to the substantial similarity criteria, the applicant
asserted that ZIIHERA[supreg] is not substantially similar to other
currently available technologies because ZIIHERA[supreg]'s novel and
distinct mechanisms of action are not the same or substantially similar
to those of other currently available therapies used for the treatment
of adults with previously treated, unresectable/metastatic HER2+ (IHC
3+) BTC. In addition, the applicant asserted that ZIIHERA[supreg] is
the first and only bispecific HER2-directed antibody indicated for this
population, and that therefore, the technology meets the newness
criterion. The following table summarizes the applicant's assertions
regarding the substantial similarity criteria. Please see the online
application posting for ZIIHERA[supreg] for the applicant's complete
statements in support of its assertion that ZIIHERA[supreg] is not
substantially similar to other currently available technologies.
[[Page 18154]]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Substantial similarity criteria Applicant response Applicant assertions regarding this criterion
--------------------------------------------------------------------------------------------------------------------------------------------------------
Does the technology use the same or similar mechanism of No..................... ZIIHERA[supreg] is not the same or substantially similar to any
action to achieve a therapeutic outcome? therapies currently used to treat adults with previously treated,
unresectable/metastatic HER2+ (IHC 3+) BTC. It is a bispecific
HER2-directed, biparatopic antibody that simultaneously binds to 2
nonoverlapping, distinct sites on HER2: the ECD4 and ECD2 domains.
Trans-binding of ZIIHERA[supreg] with HER2 results in receptor
crosslinking, clustering, and internalization, which leads to a
reduction of HER2 from the cell surface. It reduces
phosphorylation of HER2 family members (including EGFR, HER2, and
HER3), downstream signaling, and ligand-dependent and -independent
proliferation. Distinctly, ZIIHERA[supreg] potently induces CDC,
ADCC, and ADCP. ZIIHERA[supreg] is substantially differentiated
mechanistically and clinically from currently available anti-HER2
agents: HERCEPTIN[supreg], indicated for the treatment of HER2-
overexpressing breast cancer and metastatic gastric or
gastroesophageal junction adenocarcinoma; PERJETA[supreg],
indicated for use in combination with HERCEPTIN[supreg] and
DOCETAXEL for HER2+ metastatic breast cancer; and ENHERTU[supreg],
indicated for HER2+ and HER2-low breast cancer, non-small cell
lung cancer (NSCLC) activating HER2 mutations, HER2+ gastric or
gastroesophageal junction adenocarcinoma, and HER2+ solid tumors
(not specifically studied in BTC), when no other satisfactory
treatment options for unresectable/metastatic HER2 (IHC 3+) BTC
exist. ZIIHERA[supreg]'s distinct mechanisms of action were
confirmed in preclinical models where ZIIHERA[supreg] exhibited
improved antitumor activity compared with HERCEPTIN[supreg] alone
and HERCEPTIN[supreg]PERJETA[supreg] in head-to-head comparisons
across a range of tumors and HER2 expression levels: 1)
ZIIHERA[supreg] binds adjacent HER2 reorganization not observed
with HERCEPTIN[supreg] or PERJETA[supreg]; 2) ZIIHERA[supreg], but
not HERCEPTIN[supreg] or HERCEPTIN[supreg]+PERJETA[supreg], elicit
potent CDC against high HER2-expressing tumor cells in vitro (the
only HER2 agent that can elicit CDC); and 4) ZIIHERA[supreg]
mediates HER2 internalization and downregulation, inhibition of
both cell signaling and tumor growth, ADCC and ADCP, and shows
superior in vivo antitumor activity compared to
HERCEPTIN[supreg]+PERJETA[supreg] in a HER2-expressing xenograft
model. ZIIHERA[supreg] is also highly differentiated
mechanistically and clinically from chemotherapeutic regimens or
other therapies used in first line (1L) and second line (2L)
treatment of BTC. It is not a chemotherapy. Its unique asymmetric
design, its biparatopic bispecific binding, and ability to induce
HER2 receptor crosslinking is believed to drive the multiple
mechanisms of action of ZIIHERA[supreg] and its clinical activity
as a single agent. ZIIHERA[supreg] is the first and only
bispecific HER2-directed antibody indicated for the treatment of
adults with previously treated, unresectable/metastatic HER2+ (IHC
3+) BTC.
Is the technology assigned to the same MS-DRG as existing Yes.................... While ZIIHERA[supreg] will not map to MS-DRGs distinct from other
technologies? treatments administered to patients diagnosed with BTC, patient
cases receiving intravenous infusion of ZIIHERA[supreg] will be
identified by unique ICD-10-PCS procedures codes for
ZIIHERA[supreg] administration: XW033CA and XW043CA, effective
October 1, 2024.
Does new use of the technology involve the treatment of No..................... ZIIHERA[supreg] is the first and only bispecific HER2-directed,
the same/similar type of disease and the same/similar biparatopic antibody approved by FDA for the treatment of adults
patient population when compared to an existing with previously treated, unresectable/metastatic HER2+ (IHC 3+)
technology? BTC. Results from the pivotal, single-arm phase IIb HERIZON-BTC-01
study support ZIIHERA[supreg] having meaningful clinical benefit
and potential as a new standard of care for patients with HER2+
(IHC 3+) BTC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
After review of the information provided by the applicant, we note
that while the applicant stated that ZIIHERA[supreg] is the first and
only bispecific HER2-directed, biparatopic antibody approved by FDA for
the treatment of adults with previously treated, unresectable/
metastatic HER2+ (IHC 3+) BTC, there are several existing treatment
options for patients with unresectable/metastatic HER2+ (IHC 3+) BTC
such as FOLFOX, FOLFIRI, STIVARGA[supreg], or ENHERTU[supreg].\185\
Therefore, it is unclear how ZIIHERA[supreg] treats a new patient
population or disease as compared to these existing treatments.
---------------------------------------------------------------------------
\185\ National Comprehensive Care Network (NCCN). (2024,
November 27). NCCN Guidelines Version 5.2024 Biliary Tract Cancers.
Retrieved on January 8, 2025, from https://www.nccn.org.
---------------------------------------------------------------------------
We are inviting public comments on whether ZIIHERA[supreg] is
substantially similar to existing technologies and whether
ZIIHERA[supreg] meets the newness criterion.
With respect to the cost criterion, the applicant provided multiple
analyses to demonstrate that ZIIHERA[supreg] meets the cost criterion.
Each analysis followed the order of operations summarized in the
following table.
ZIIHERA[supreg] Cost Analysis
------------------------------------------------------------------------
------------------------------------------------------------------------
Inclusion/exclusion criteria...... For the Inclusion/Exclusion criteria
used in the Cost Analysis,
including the data source and lists
of ICD-10-CM codes, ICD-10-PCS
codes, and MS-DRGs used by the
applicant, see the cost criterion
codes and MS-DRGs attachment
included in the online posting for
ZIIHERA[supreg].
Claims identified................. Scenario 1: 152 claims mapping to 13
MS-DRGs, with 12.50% of claims
mapping to MS-DRG 847 (Chemotherapy
Without Acute Leukemia as Secondary
Diagnosis with CC).
Scenario 2: 3,807 claims mapping to
30 MS-DRGs, with 44.44% of claims
mapping to MS-DRG 435 (Malignancy
of Hepatobiliary System or Pancreas
with MCC).
[[Page 18155]]
Charges removed for prior Per the applicant, the utilization
technology. of ZIIHERA[supreg] would replace
chemotherapy charges. The applicant
removed 15.9% of radiology charges
from identified cases in which BTC
was the primary diagnosis and
removed 19.9% of radiology charges
from identified cases in which BTC
was a secondary diagnosis. Per the
applicant, these percentages were
derived based on an analysis of the
revenue center file from the 100%
Inpatient Standard Analytic File
(SAF) in FY 2023. The applicant
estimated the percentage of
chemotherapy therapy-related
radiology charges for each set of
cases by dividing the sum of
charges for chemotherapy-related
revenue codes (0331, 0332, 0335) by
the sum of charges for the revenue
codes comprising total radiology
charges. The applicant did not
remove indirect charges related to
the prior technology.
Standardized charges.............. The applicant used the
standardization formula provided in
Appendix A of the application. The
applicant used all relevant values
reported in the impact file posted
with the FY 2023 IPPS/LTCH PPS
final rule correcting amendment.
Inflation factor.................. The applicant applied an inflation
factor of 8.406% to the
standardized charges, based on the
inflation factor used to calculate
outlier threshold charges in the FY
2025 IPPS/LTCH PPS final rule.
Charges added for the new The applicant added charges for the
technology. new technology by dividing the cost
of the new technology by the
national average cost-to-charge
ratio of 0.178 for Drugs and
Cellular Therapies from the FY 2025
IPPS/LTCH PPS final rule. The
applicant did not add indirect
charges related to the new
technology.
Cost analysis results............. Scenario 1:
--Average case-weighted threshold
amount: $87,202.
--Final inflated average case-
weighted standardized charge per
case: $197,284.
Scenario 2:
--Average case-weighted threshold
amount: $93,683.
--Final inflated average case-
weighted standardized charge per
case: $209,487.
------------------------------------------------------------------------
Because the final inflated average case-weighted standardized
charge per case exceeded the average case-weighted threshold amount in
both scenarios, the applicant asserted that ZIIHERA[supreg] meets the
cost criterion.
We are inviting public comments on whether ZIIHERA[supreg] meets
the cost criterion.
With regard to the substantial clinical improvement criterion, the
applicant asserted that ZIIHERA[supreg] represents a substantial
clinical improvement over existing technologies because it is a
bispecific HER2-directed antibody with multiple, distinct mechanisms of
action and a differentiated clinical profile, and it is the first and
only FDA-approved treatment for HER2+ (IHC 3+) BTC. In addition, the
applicant asserted that ZIIHERA[supreg] fulfills an unmet need for this
patient population by providing an optimal chemotherapy-free treatment
option, where patients also have the potential to achieve meaningfully
improved clinical benefits. The applicant provided 1 study and 2 poster
presentations of the same study to support these claims, as well as 3
background articles on other treatments for advanced BTC.\186\ The
following table summarizes the applicant's assertions regarding the
substantial clinical improvement criterion. Please see the online
posting for ZIIHERA[supreg] for the applicant's complete statements
regarding the substantial clinical improvement criterion and the
supporting evidence provided.
---------------------------------------------------------------------------
\186\ Background articles and supplemental material are not
included in the following table but can be accessed via the online
posting for the technology.
------------------------------------------------------------------------
Supporting evidence provided by the
Applicant statements in support applicant
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #1: The technology offers a
treatment option for a patient population unresponsive to, or ineligible
for, currently available treatments
------------------------------------------------------------------------
ZIIHERA[supreg] is the first and Pant S, et al. Zanidatamab in
only bispecific HER2-directed previously treated HER2-positive
antibody for the treatment of biliary tract cancer: overall
adults with previously treated, survival and longer follow-up from
unresectable/metastatic HER2+ the phase 2b HERIZON-BTC-01 study.
(IHC 3+) BTC. American Society of Clinical
Oncology annual meeting. 2024.
Abstract; Poster 4091.
Harding JJ, et al. Zanidatamab for
HER2-amplified, unresectable,
locally advanced or metastatic
biliary tract cancer (HERIZON-BTC-
01): a multicentre, single-arm,
phase 2b study. Lancet Oncol.
2023;24(7):772-82.
The applicant also provided
background information and
supplemental material to support
this claim, which can be accessed
via the online posting for the
technology.
------------------------------------------------------------------------
Substantial Clinical Improvement Assertion #2: The technology
significantly improves clinical outcomes relative to services or
technologies previously available
------------------------------------------------------------------------
In HERIZON-BTC-01, ZIIHERA[supreg] Pant, 2024, op. cit.
demonstrated clinical benefit of Harding, 2023, op. cit.
sustained/durable response rates The applicant also provided
and longer overall survival background information and
compared to previously reported supplemental material to support
outcomes of 2L therapies for this claim, which can be accessed
advanced BTC. via the online posting for the
technology.
[[Page 18156]]
Treatment with ZIIHERA[supreg] Pant, 2024, op. cit.
provides a marked clinical Harding, 2023, op. cit.
benefit with a significantly The applicant also provided
higher response rate than background information and
previously reported for currently supplemental material to support
preferred 2L chemotherapy regimen. this claim, which can be accessed
via the online posting for the
technology.
The overall benefit:risk Harding, 2023, op. cit.
assessment of ZIIHERA[supreg] is Wasan H, et al. Health-related
favorable. ZIIHERA[supreg] quality of life outcomes in
fulfills an unmet medical need patients with zanidatamab-treated
and provides an option for HER2-positive biliary tract cancer
patients to receive clinical in the Phase 2b HERIZON-BTC-01
benefit with a low risk of harm. study. Presented at European
Society for Medical Oncology (ESMO)
2023; Poster presentation, Poster
101P.
Pant, 2024, op. cit.
The applicant also provided
background information and
supplemental material to support
this claim, which can be accessed
via the online posting for the
technology.
------------------------------------------------------------------------
We did not receive any written comments in response to the New
Technology Town Hall meeting notice published in the Federal Register
regarding the substantial clinical improvement criterion for
ZIIHERA[supreg].
After review of the information provided by the applicant, we have
the following concerns regarding whether ZIIHERA[supreg] meets the
substantial clinical improvement criterion. With respect to the
assertion that ZIIHERA[supreg] offers a treatment option for a patient
population unresponsive to or ineligible for existing therapies, the
applicant stated that ZIIHERA[supreg] is the first and only FDA-
approved bispecific HER2-directed antibody for the treatment of adults
with previously treated, unresectable/metastatic HER2+ (IHC 3+) BTC.
However, we note that while the target (HER2+) and type of therapy
(bispecific antibody) for a particular indication may relate to
mechanism of action under the newness criterion, it is not relevant to
the demonstration of substantial clinical improvement. Further, we note
that the applicant stated that FOLFOX is the preferred subsequent line
therapy option for these patients, and we also note that NCCN
guidelines list additional available therapies including: FOLFIRI,
ENHERTU[supreg], and HERCEPTIN[supreg] plus TUKYSA[supreg]. We further
note that while the applicant provided studies describing outcomes from
the HERIZON-BTC-01 trial of ZIIHERA[supreg] as well as background
studies describing outcomes for other treatment options in 2L advanced
BTC, the studies did not demonstrate that patients eligible for
treatment with ZIIHERA[supreg] are unable to receive other existing
therapies. Therefore, we question whether ZIIHERA[supreg] offers a
treatment option for a patient population unresponsive to, or
ineligible for other existing therapies.
With respect to the assertion that ZIIHERA[supreg] significantly
improves clinical outcomes relative to services or technologies
previously available, the applicant provided 1 published peer-reviewed
study of HERIZON-BTC-01 (Harding et al., 2023) and 2 poster
presentations that are analyses of HERIZON-BTC-01 (Pant et al., 2024;
Wasan et al., 2023) in support of its claims. Harding et al. (2023) and
Pant et al. (2024) provided results of the phase IIB HERIZON-BTC-01, a
global, multicenter, single arm, cohort study assessing ZIIHERA[supreg]
treatment in 87 patients with HER2+ BTC, which were grouped into
cohorts based on immunohistochemistry (IHC): cohort 1, n=80 (HER2+ (IHC
2+ or IHC 3+)) and cohort 2, n=7 (IHC 0 or IHC 1+). We note that the
HERIZON-BTC-01 study did not compare ZIIHERA[supreg] outcomes to
outcomes for other existing treatments, and therefore we question the
extent to which this can be relied upon for a finding of substantial
clinical improvement. We note that 63 percent of the study's patients
were enrolled at clinical trial sites in Asia, and we question whether
the location of the clinical trial sites being outside of the US could
affect the generalizability of the findings to the U.S. Medicare
patient population. We also question whether the study's sample size
may have impacted the ability to perform or interpret comparative
analyses within and between the two different patient cohorts.
With respect to the applicant's claim that, in HERIZON-BTC-01 study
(Harding et al., 2023), ZIIHERA[supreg] demonstrated a clinical benefit
of sustained/durable response rates, longer OS, and a significantly
higher response rate compared to previously reported outcomes of 2L
advanced BTC therapies, we note that while the applicant provided
background studies comparing FOLFOX and FOLFIRI to ZIIHERA[supreg], the
supporting evidence provided did not compare ZIIHERA[supreg] to other
FDA-approved therapies used for unresectable/metastatic BTC such as
ENHERTU[supreg]. The applicant stated that ZIIHERA[supreg]'s median
confirmed objective response rate (cORR) of 51.6 percent represents a
marked clinical benefit for the target population, which is
approximately 10-fold higher than the previously reported median ORR
for FOLFOX and significantly more than the historical response rate of
7.7 percent for 2L chemotherapy regimens, noting the highest historical
rate reported of 14.8 percent was seen in the FOLFIRI regimen. However,
we question whether the differences in the studies' reported responses
are comparable given that the studies are different in design,
protocol, and methodology, which may limit the ability to interpret the
outcomes. While the applicant stated that FOLFOX chemotherapy regimen
remains the preferred 2L treatment of advanced BTC, as there are other
treatments used in the 2L+ treatment of advanced BTC, we would
appreciate additional information on the comparison of outcomes with
ZIIHERA[supreg] to those with other FDA-approved therapies used for
advanced/metastatic BTC.
With respect to the claim that ZIIHERA[supreg] has a manageable
safety profile with favorable tolerability in adults with previously
treated, unresectable/metastatic HER2+ (IHC 3+) BTC, the applicant
stated that, in contrast to chemotherapy regimens used as 2L or later
therapies, ZIIHERA[supreg] as a single agent is well tolerated in the
pretreated BTC patient population and the resulting adverse events are
manageable. In support of this claim, the applicant provided results of
the HERIZON-BTC-01 study (Harding et al., 2023, Wasan et al., 2023, and
Pant et al., 2024), which measured safety and quality of life in 87
patients. We are concerned that the safety and quality of life data
were combined in both the Harding et al. (2023) and Pant et al. (2024)
studies for cohort 1 (n=80) (HER2+ (IHC 3+ or IHC 2+)) and cohort 2
(n=7) (IHC 1+ or IHC 0), and the Wasan paper reported from cohort 1
(HER2+ (IHC 3+ or IHC 2+)). Therefore,
[[Page 18157]]
these studies did not provide data on safety and treatment-related
adverse events for IHC 3+ BTC patients separately. We note that since
ZIIHERA[supreg] is indicated for use in patients with HER2+ (IHC 3+)
BTC only, we question whether the inclusion of patients with HER2+ (IHC
2+) BTC and patients with IHC 1+ or IHC 0 BTC is appropriate to
demonstrate outcomes for HER2+ (IHC 3+) BTC patients specifically. We
question whether this analysis provides sufficient evidence as to
ZIIHERA[supreg]'s overall benefit-risk profile and how it compares to
other treatments given that Wasan et al. and Pant et al., which are
unpublished and non-peer-reviewed conference posters, do not include
full details of the study and methodology, which therefore may limit
our ability to interpret the results. We further note that HERIZON-BTC-
01 was a single arm study and that the clinical outcome and HRQoL data
are not specific to IHC 3+ BTC patients, in accordance with
ZIIHERA[supreg]'s FDA indication.
We are inviting public comments on whether ZIIHERA[supreg] meets
the substantial clinical improvement criterion.
6. Proposed FY 2026 Applications for New Technology Add-On Payments
(Alternative Pathways)
As discussed previously, beginning with applications for FY 2021, a
medical device designated under FDA's Breakthrough Devices Program that
has received marketing authorization for the indication covered by the
Breakthrough Device designation, may qualify for the new technology
add-on payment under an alternative pathway. Additionally, beginning
with FY 2021, a medical product that is designated by FDA as a
Qualified Infectious Disease Product (QIDP) and has received marketing
authorization for the indication covered by the QIDP designation, and,
beginning with FY 2022, a medical product that is a new medical product
approved under FDA's Limited Population Pathway for Antibacterial and
Antifungal Drugs (LPAD) and used for the indication approved under the
LPAD pathway, may also qualify for the new technology add-on payment
under an alternative pathway. Under an alternative pathway, a
technology will be considered not substantially similar to an existing
technology for purposes of the new technology add-on payment under the
IPPS and will not need to meet the requirement that it represents an
advance that substantially improves, relative to technologies
previously available, the diagnosis or treatment of Medicare
beneficiaries. These technologies must still be within the 2-to-3-year
newness period to be considered ``new,'' and must also still meet the
cost criterion.
As discussed previously, in the FY 2023 IPPS/LTCH PPS final rule,
we finalized our proposal to publicly post online applications for new
technology add-on payment beginning with FY 2024 applications (87 FR
48986 through 48990). As noted in the FY 2023 IPPS/LTCH PPS final rule,
we are continuing to summarize each application in this proposed rule.
However, while we are continuing to provide discussion of the concerns
or issues we identified with respect to applications submitted under
the alternative pathway, we are providing more succinct information as
part of the summaries in the proposed and final rules regarding the
applicant's assertions as to how the medical service or technology
meets the applicable new technology add-on payment criteria. We refer
readers to https://mearis.cms.gov/public/publications/ntap for the
publicly posted FY 2026 new technology add-on payment applications and
supporting information (with the exception of certain cost and volume
information, and information or materials identified by the applicant
as confidential or copyrighted), including tables listing the ICD-10-CM
codes, ICD-10-PCS codes, and/or MS-DRGs related to the analyses of the
cost criterion for certain technologies for the FY 2026 new technology
add-on payment applications. In addition, for certain FY 2026 new
technology add-on payment applications, we are making available
separate tables listing the ICD-10-CM codes and/or ICD-10-PCS codes
that we believe would be used to identify cases relevant to the
Breakthrough Device-designated indications, or would be appropriate to
exclude for cases related to FDA market authorized indications that are
not covered by the Breakthrough Device designation indications, for
purposes of the new technology add-on payment, if approved, in Table 10
associated with this proposed rule, available via the internet on the
CMS website at https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps. Click on the link on the left side of the
screen titled ``FY 2026 IPPS Proposed Rule Home Page'' or ``Acute
Inpatient--Files for Download''. Please see section VI of the Addendum
for additional information regarding tables associated with this
proposed rule.
We received 34 applications for new technology add-on payments for
FY 2026 under the new technology add-on payment alternative pathway. As
discussed in the FY 2024 IPPS/LTCH PPS final rule (88 FR 58948 through
58958) and the FY 2025 IPPS/LTCH PPS final rule (89 FR 69242 through
69245), we finalized that beginning with the new technology add-on
payment applications for FY 2025, for technologies that are not already
FDA market authorized for the indication that is the subject of the new
technology add-on payment application, applicants must have a complete
and active FDA market authorization request at the time of new
technology add-on payment application submission and must provide
documentation of FDA acceptance or filing to CMS at the time of
application submission, consistent with the type of FDA marketing
authorization application the applicant has submitted to FDA. See Sec.
412.87(e) and further discussion in the FY 2024 and the FY 2025 IPPS/
LTCH PPS final rules (88 FR 58948 through 58958; 89 FR 69242 through
69245). Of the 34 applications received under the alternative pathway,
1 application was not eligible for consideration for new technology
add-on payment because it did not meet these requirements; and 4
applicants withdrew their applications prior to the issuance of this
proposed rule. Of the remaining 29 applications, 27 of the technologies
received a Breakthrough Device designation from FDA. The remaining two
applications were designated as a QIDP by FDA. We did not receive any
applications for technologies approved through the LPAD pathway.
In accordance with the regulations under Sec. 412.87(f)(2),
applicants for new technology add-on payments for FY 2026 for
Breakthrough Devices must have FDA marketing authorization by May 1 of
the year prior to the beginning of the fiscal year for which the
application is being considered. Under Sec. 412.87(f)(3), applicants
for new technology add-on payments for FY 2026 for QIDPs and
technologies approved under the LPAD pathway must have FDA marketing
authorization by July 1 of the year prior to the beginning of the
fiscal year for which the application is being considered. The policy
finalized in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58742)
provides for conditional approval for a technology for which an
application is submitted under the alternative pathway for certain
antimicrobial products (QIDPs and LPADs) at Sec. 412.87(d) that does
not receive FDA marketing authorization by July 1 prior to the
particular fiscal year for which the applicant applied for new
technology add-on payments, provided that the technology receives FDA
[[Page 18158]]
marketing authorization before July 1 of the fiscal year for which the
applicant applied for new technology add-on payments. We refer the
reader to the FY 2021 IPPS/LTCH final rule for a complete discussion of
this policy (85 FR 58737 through 58742).
As we did in the FY 2025 IPPS/LTCH PPS proposed rule, for
applications under the alternative new technology add-on payment
pathway, in this proposed rule we are making a proposal to approve or
disapprove each of these 29 applications for FY 2026 new technology
add-on payments. Therefore, in this section of the preamble of this
proposed rule, we provide a table summarizing background information
and the cost analysis for each alternative pathway application and
propose whether or not each technology would be eligible for the new
technology add-on payment for FY 2026. We refer readers to section
II.H.8. of the preamble of the FY 2020 IPPS/LTCH PPS final rule (84 FR
42292 through 42297) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58715
through 58733) for further discussion of the alternative new technology
add-on payment pathways for these technologies.
a. Alternative Pathway for Breakthrough Devices
1. 4WEB Medical Ankle Truss System
The following table summarizes the information provided in the new
technology add-on payment application for the 4WEB Medical Ankle Truss
System. We note that 4WEB Medical, Inc. submitted an application for
new technology add-on payments for the 4WEB Medical Ankle Truss System
for FY 2024, as summarized in the FY 2024 IPPS/LTCH PPS proposed rule
(88 FR 26924 through 26926), which the applicant withdrew prior to the
issuance of the FY 2024 IPPS/LTCH PPS final rule (88 FR 58919).
BILLING CODE 4120-01-P
[[Page 18159]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.001
[[Page 18160]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.002
After review of the information provided by the applicant, since
the indication for which the applicant received 510(k) clearance is
included within the scope of the Breakthrough Device designation
indication, it appears that the FDA-cleared indication is appropriate
for consideration for new technology add-on payment under the
alternative pathway criteria.
We agree with the applicant that the 4WEB Medical ATS meets the
cost criterion and are therefore proposing to approve the 4WEB Medical
ATS for new technology add-on payments for FY 2026 for use as an
accessory to the Stryker T2 Ankle Arthrodesis Nail or the Stryker Valor
Hindfoot Fusion Nail as part of a TCC fusion construct in a salvage
procedure following failed ankle arthrodesis or failed ankle
arthroplasty for patients at risk for loss of limb.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
4WEB Medical ATS to the hospital to be $23,500 per patient. Per the
applicant, one 4WEB Medical ATS is used per patient per hospital
discharge. We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the 4WEB Medical ATS would be $15,275 for FY 2026 (that is, 65 percent
of the average cost of the technology).
We invite public comments on whether the 4WEB Medical ATS meets the
cost criterion and our proposal to approve new technology add-on
payments for the 4WEB Medical ATS for FY 2026.
2. AeroPace[supreg] System
The following table summarizes the information provided in the new
technology add-on payment application for the AeroPace[supreg] System.
[[Page 18161]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.003
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received PMA approval from FDA
is
[[Page 18162]]
included within the scope of the Breakthrough Device designation
indication, it appears that the FDA-approved indication is appropriate
for consideration for new technology add-on payment under the
alternative pathway criteria.
We note that the applicant stated that the technology is not yet
available for sale because it would take time following FDA approval to
finalize its commercial operations and market materials to include the
final labeling and regulatory information. We are interested in
additional information regarding the cause for any delay in the
technology's market availability, as it received FDA approval on
December 4, 2024, and the applicant states that it is not expected to
be commercially available until October 1, 2025.
We agree with the applicant that the AeroPace[supreg] System meets
the cost criterion and are therefore proposing to approve the
AeroPace[supreg] System for new technology add-on payments for FY 2026,
for use to improve weaning success--increase weaning, reduce ventilator
days, and reduce reintubation--in patients ages 18 years or older on MV
>=96 hours and who have not weaned.
The applicant has not provided an estimate for the cost of the
AeroPace[supreg] System at the time of this proposed rule. The
applicant stated that the operating components include the
AeroPace[supreg] Catheter and the Airway Sensor. The applicant also
noted the capital components of the AeroPace[supreg] Neurostimulation
Console, Catheter Cable, Handheld Controller, and Airway Sensor Cable.
Because section 1886(d)(5)(K)(i) of the Act requires that the Secretary
establish a mechanism to recognize the costs of new medical services or
technologies under the payment system established under that
subsection, which establishes the system for payment of the operating
costs of inpatient hospital services, we do not include capital costs
in the add-on payments for a new medical service or technology or make
new technology add-on payments under the IPPS for capital-related costs
(86 FR 45145). As noted, the applicant stated that the cost of the
AeroPace[supreg] Neurostimulation Console, Catheter Cable, Handheld
Controller, and Airway Sensor Cable are capital costs. Therefore, it
appears that these components are not eligible for new technology add-
on payment because, as discussed in prior rulemaking and as noted, we
only make new technology add-on payments for operating costs (72 FR
47307 through 47308). We expect the applicant to submit cost
information prior to the final rule, and we will provide an update
regarding the new technology add-on payment amount for the technology,
if approved, in the final rule. Any new technology add-on payment for
the AeroPace[supreg] System would be subject to our policy under Sec.
412.88(a)(2) where we limit new technology add-on payment to the lesser
of 65 percent of the average cost of the technology, or 65 percent of
the costs in excess of the MS-DRG payment for the case.
We invite public comments on whether the AeroPace[supreg] System
meets the cost criterion and our proposal to approve new technology
add-on payments for the AeroPace[supreg] System for FY 2026.
3. AGENTTM Paclitaxel-Coated Balloon Catheter
The following table summarizes the information provided in the new
technology add-on payment application for the AGENTTM
Paclitaxel-Coated Balloon Catheter.
BILLING CODE 4120-01-P
[[Page 18163]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.004
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received PMA approval from FDA
is
[[Page 18164]]
included within the scope of the Breakthrough Device designation
indication, it appears that the FDA-approved indication is appropriate
for consideration for new technology add-on payment under the
alternative pathway criteria.\187\
---------------------------------------------------------------------------
\187\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------
We agree with the applicant that the AGENTTM Paclitaxel-
Coated Balloon Catheter meets the cost criterion and are therefore
proposing to approve the AGENTTM Paclitaxel-Coated Balloon
Catheter for new technology add-on payments for FY 2026 for use after
appropriate vessel preparation in adult patients undergoing PCI in
coronary arteries 2.0 mm to 4.0 mm in diameter and lesions up to 26 mm
in length for the purpose of improving myocardial perfusion when
treating ISR.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
AGENTTM Paclitaxel-Coated Balloon Catheter to the hospital
to be $6,175 per patient. We note that the cost information for this
technology may be updated in the final rule based on revised or
additional information CMS receives prior to the final rule. Under
Sec. 412.88(a)(2), we limit new technology add-on payments to the
lesser of 65 percent of the average cost of the technology, or 65
percent of the costs in excess of the MS-DRG payment for the case. As a
result, we are proposing that the maximum new technology add-on payment
for a case involving the use of the AGENTTM Paclitaxel-
Coated Balloon Catheter would be $4,013.75 for FY 2026 (that is, 65
percent of the average cost of the technology).
We invite public comments on whether the AGENTTM
Paclitaxel-Coated Balloon Catheter meets the cost criterion and our
proposal to approve new technology add-on payments for the
AGENTTM Paclitaxel-Coated Balloon Catheter for FY 2026.
4. alfapump[supreg] System
The following table summarizes the information provided in the new
technology add-on payment application for the alfapump[supreg] system.
BILLING CODE 4120-01-P
[[Page 18165]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.005
[[Page 18166]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.006
BILLING CODE 4120-01-C
As noted, the applicant stated that the technology is not expected
to be commercially available until July 2025 due to its internal
production capacity and the phased roll out plan into Liver Transplant
centers. We are interested in additional information regarding any
delay, such as whether the technology would be available for sale
during its phased roll out plan.
We agree with the applicant that the alfapump[supreg] system meets
the cost criterion and are therefore proposing to approve the
alfapump[supreg] system for new technology add-on payments for FY 2026,
in adult patients with refractory or recurrent ascites due to liver
cirrhosis for the removal of excess peritoneal fluid from the
peritoneal cavity into the bladder.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
alfapump[supreg] system to the hospital to be $30,000 per patient. Per
the applicant, the alfapump[supreg] system is a single patient use
implantable device, and one device is used per hospital stay. We note
that the cost information for this technology may be updated in the
final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the alfapump[supreg] system would be $19,500 for FY 2026 (that is, 65
percent of the average cost of the technology).
We invite public comments on whether the alfapump[supreg] system
meets the cost criterion and our proposal to approve new technology
add-on payments for the alfapump[supreg] system.
5. aprevo[supreg]-C Cervical Interbody Fusion Device
The following table summarizes the information provided in the new
technology add-on payment application for the aprevo[supreg]-C cervical
interbody fusion device.
BILLING CODE 4120-01-P
[[Page 18167]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.007
[[Page 18168]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.008
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received 510(k) clearance from
FDA is included within the scope of the Breakthrough Device
designation, it appears that the FDA 510(k) clearance indication is
appropriate for consideration for new technology add-on payment under
the alternative pathway criteria.
We note that the applicant stated that the technology is expected
to be commercially available starting October 1, 2025, to align with
the start of the new technology add-on payment. We are interested in
additional information regarding the cause for any delay in the
technology's market availability as the technology received FDA
clearance on November 15, 2024.
We agree with the applicant that the aprevo[supreg]-C cervical
interbody fusion device meets the cost criterion and are therefore
proposing to approve the aprevo[supreg]-C cervical interbody fusion
device for new technology add-on payments for FY 2026, as interbody
fusion devices indicated at one or more levels of the cervical spine
(C2-T1) in patients with the following degenerative cervical
conditions: cervical disc disease, instability, trauma including
fractures, deformity defined as kyphosis, lordosis, or scoliosis,
cervical spondylotic myelopathy, spinal stenosis, and failed previous
fusion.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
aprevo[supreg]-C cervical interbody fusion device to the hospital to be
$32,500 per patient. The applicant stated that the average number of
cervical interbody fusion (CIBF) devices per procedure is 4.42 if the
patient has a deformity and 1.7 if the patient has a degenerative
condition. Per the applicant, based on the projected mix between these
diagnoses, the average number of aprevo[supreg]-C CIBF per procedure is
expected to be 3.25. The applicant stated that the selling price will
be $19,000 for the first level, and $6,000 for each additional level.
We note that the cost information for this technology may be updated in
the final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the aprevo[supreg]-C cervical interbody fusion device would be $21,125
for FY 2026 (that is, 65 percent of the average cost of the
technology).
We invite public comments on whether the aprevo[supreg]-C cervical
interbody fusion device meets the cost criterion and our proposal to
approve new technology add-on payments for the aprevo[supreg]-C
cervical interbody fusion device for FY 2026.
6. CERAMENT[supreg] G
The following table summarizes the information provided in the new
technology add-on payment application for CERAMENT[supreg] G.
BILLING CODE 4120-01-P
[[Page 18169]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.009
BILLING CODE 4120-01-C
We note that under the eligibility criteria for approval under the
alternative pathway for certain transformative devices, only the use of
[[Page 18170]]
the technology for the indication that corresponds to the technology's
Breakthrough Device designation would be eligible for the new
technology add-on payment. Therefore, only the use of CERAMENT[supreg]
G for open fractures, and the FDA Breakthrough Device designation it
received for that use, are relevant for purposes of the new technology
add-on payment application for FY 2026. We note that CERAMENT[supreg] G
is also indicated for use for bone infections and was approved for new
technology add-on payment for that indication in the FY 2023 IPPS/LTCH
PPS final rule (87 FR 48961 through 48966). As discussed in section
II.E.4. of the preamble of this proposed rule, we are proposing to
discontinue making new technology add-on payments for FY 2026 for use
of CERAMENT[supreg] G for bone infections. We believe cases involving
the use of CERAMENT[supreg] G related to bone infections, which would
no longer be eligible for new technology add-on payment in FY 2026,
would be identified by the ICD-10-PCS code XW0V0P7 (Introduction of
antibiotic-eluting bone void filler into bones, open approach, new
technology group 7) in combination with the ICD-10-CM codes in category
M86 (Osteomyelitis). We are inviting public comments on the use of
these codes to exclude the indication for use of CERAMENT[supreg] G
related to bone infections, which would not be eligible for the new
technology add-on payment for FY 2026, if approved.
We agree with the applicant that CERAMENT[supreg] G meets the cost
criterion and are therefore proposing to approve CERAMENT[supreg] G for
new technology add-on payments for FY 2026 for use as a bone void
filler intended for use in defects in the extremities of skeletally
mature patients as an adjunct to systemic antibiotic therapy and
surgical debridement as part of the standard treatment approach to open
fractures.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost to the
hospital to be $8,750 per patient. The applicant stated that the cost
of 10 cc of CERAMENT[supreg] G would be $8,750, and expected that 10 cc
of CERAMENT[supreg] G would be used per patient as indicated in a long-
term study of 81 patients with open fractures.\188\ We note that the
cost information for this technology may be updated in the final rule
based on revised or additional information CMS receives prior to the
final rule. Under Sec. 412.88(a)(2), we limit new technology add-on
payments to the lesser of 65 percent of the average cost of the
technology, or 65 percent of the costs in excess of the MS-DRG payment
for the case. As a result, we are proposing that the maximum new
technology add-on payment for a case involving the use of
CERAMENT[supreg] G would be $5,687.50 for FY 2026 (that is, 65 percent
of the average cost of the technology).
---------------------------------------------------------------------------
\188\ Henry, J, Ali, A., and Elkhidir, I et al. (2023). Long-
term follow-up of open Gustilo-Anderson IIIB fractures treated with
an adjuvant local antibiotic hydroxyapatite bio-composite. Cureus
15(5): e39103. DOI 10.7759/cureus.39103.
---------------------------------------------------------------------------
We invite public comments on whether CERAMENT[supreg] G meets the
cost criterion and our proposal to approve new technology add-on
payments for CERAMENT[supreg] G for FY 2026.
7. Dexcom G7 Hospital Continuous Glucose Monitoring (CGM) System
The following table summarizes the information provided in the new
technology add-on payment application for the Dexcom G7 Hospital CGM
System.
BILLING CODE 4120-01-P
[[Page 18171]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.010
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we note
that under the eligibility criteria for approval under the alternative
pathway for
[[Page 18172]]
certain transformative devices, only the use of the technology for the
indication that corresponds to the technology's Breakthrough Device
designation would be eligible for the new technology add-on payment for
FY 2026. As noted by the applicant, the expected De Novo indication is
not limited to insulin-treated diabetes patients, as noted in the
Breakthrough Device designation. Therefore, it appears that only the
use of the Dexcom G7 Hospital CGM System for insulin-treated diabetes,
and the FDA Breakthrough Device designation it received for that use,
would be relevant for purposes of the new technology add-on payment
application for FY 2026.
We believe the relevant ICD-10-CM codes to identify the
Breakthrough Device-designated indication for use of the technology in
insulin-treated diabetes patients would be the ICD-10-CM code Z79.4
(Long term (current) use of insulin) in combination with: the ICD-10-CM
codes in the categories E08 (Diabetes mellitus due to underlying
condition), E09 (Drug or chemical induced diabetes mellitus), E11 (Type
2 diabetes mellitus), or E13 (Other specified diabetes mellitus), or
the ICD-10-CM codes in the subcategories O24.1 (Pre-existing type 2
diabetes mellitus, in pregnancy, childbirth and the puerperium), O24.3
(Unspecified pre-existing diabetes mellitus in pregnancy, childbirth
and the puerperium), O24.8 (Other pre-existing diabetes mellitus in
pregnancy, childbirth, and the puerperium), or O24.9 (Unspecified
diabetes mellitus in pregnancy, childbirth and the puerperium).
Insulin-treated diabetes patients may also be identified by: the ICD-
10-CM codes in category E10 (Type 1 diabetes mellitus), the ICD-10-CM
codes in the subcategory O24.0 (Pre-existing type 1 diabetes mellitus,
in pregnancy, childbirth and the puerperium), or the ICD-10-CM codes
O24.414 (Gestational diabetes mellitus in pregnancy, insulin
controlled), O24.424 (Gestational diabetes mellitus in childbirth,
insulin controlled), or O24.434 (Gestational diabetes mellitus in the
puerperium, insulin controlled). We are inviting public comments on the
use of these ICD-10-CM diagnosis codes to identify the Breakthrough
Device-designated indication for purposes of the new technology add-on
payment, if approved.
We agree with the applicant that the Dexcom G7 Hospital CGM System
meets the cost criterion and are therefore proposing to approve the
Dexcom G7 Hospital CGM System for new technology add-on payments for FY
2026, subject to the technology receiving FDA marketing authorization
for the indication corresponding to the Breakthrough Device designation
by May 1, 2025.
The applicant has not provided an estimate for the cost of the
Dexcom G7 Hospital CGM System at the time of this proposed rule. The
applicant stated that the following components are included for the
cost of the technology: the operating cost of the Dexcom G7 Hospital
CGM Wearable Sensor and Applicator, and the capital cost of the Dexcom
G7 Hospital CGM System Display App. Because section 1886(d)(5)(K)(i) of
the Act requires that the Secretary establish a mechanism to recognize
the costs of new medical services or technologies under the payment
system established under that subsection, which establishes the system
for payment of the operating costs of inpatient hospital services, we
do not include capital costs in the add-on payments for a new medical
service or technology or make new technology add-on payments under the
IPPS for capital-related costs (86 FR 45145). As noted, the applicant
stated that the cost of the Dexcom G7 Hospital CGM System Display App
is a capital cost. Therefore, it appears that this component is not
eligible for new technology add-on payment because, as discussed in
prior rulemaking and as noted, we only make new technology add-on
payments for operating costs (72 FR 47307 through 47308). We expect the
applicant to submit cost information prior to the final rule, and we
will provide an update regarding the new technology add-on payment
amount for the technology, if approved, in the final rule. Any new
technology add-on payment for the Dexcom G7 Hospital CGM System would
be subject to our policy under Sec. 412.88(a)(2) where we limit new
technology add-on payment to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case.
We invite public comments on whether the Dexcom G7 Hospital CGM
System meets the cost criterion and our proposal to approve new
technology add-on payments for the Dexcom G7 Hospital CGM System for FY
2026, subject to the technology receiving FDA marketing authorization
for the indication corresponding to the Breakthrough Device designation
by May 1, 2025.
8. DrugSorb-ATR Device
The following table summarizes the information provided in the new
technology add-on payment application for the DrugSorb-ATR Device.
BILLING CODE 4120-01-P
[[Page 18173]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.011
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we agree
with the applicant that the DrugSorb-ATR device meets the cost
criterion and are therefore proposing to approve the DrugSorb-ATR
device for new technology add-on payments for FY 2026, subject to the
technology receiving FDA marketing authorization for the indication
corresponding to the Breakthrough Device designation by May 1, 2025.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
DrugSorb-ATR device to the hospital to be $7,000 per patient. We note
that the cost information for this technology may be updated in the
final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the DrugSorb-ATR device would be $4,550 for FY 2026 (that is, 65
percent of the average cost of the technology).
We invite public comments on whether the DrugSorb-ATR device meets
the cost criterion and our proposal to approve new technology add-on
payments for the DrugSorb-ATR
[[Page 18174]]
device for FY 2026, subject to the technology receiving FDA marketing
authorization for the indication corresponding to the Breakthrough
Device designation by May 1, 2025.
9. Emily's Care Nourish Test System (Model 1)
The following table summarizes the information provided in the new
technology add-on payment application for the Emily's Care Nourish Test
System (Model 1).
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP30AP25.012
[[Page 18175]]
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we note
that under the eligibility criteria for approval under the alternative
pathway for certain transformative devices, only the use of the
technology for the indication that corresponds to the technology's
Breakthrough Device designation would be eligible for the new
technology add-on payment for FY 2026. Therefore, only the use of the
Emily's Care Nourish Test System (Model 1) for VLBW neonates and
infants in the NICU, and the FDA Breakthrough Device designation it
received for that use, are relevant for purposes of the new technology
add-on payment application for FY 2026.
We note the following concerns with respect to the cost criterion.
We are unclear how the applicant identified the 25,000 claims used in
its cost analysis, including the type of source data and the data year
that were used to identify cases. The applicant did not provide a
completed cost criterion codes and MS-DRGs worksheet and we are unclear
how ICD-10-PCS and/or -CM codes were used to identify potential cases
representing patients that may be eligible for use of the Emily's Care
Nourish Test System (Model 1). We note that MS-DRGs 790 and 791
identified by the applicant may represent a patient population broader
than those cases that would be included within the scope of the
Breakthrough Device designation indication that is appropriate for
consideration for new technology add-on payment under the alternative
pathway criteria (VLBW neonates and infants less than 6 months of age
in the NICU), and we question whether using these MS-DRGs without
additional inclusion and/or exclusion criteria would be representative
of cases eligible for new technology add-on payment.
Furthermore, it appears that the applicant did not identify
relevant cases from a claims database such as the MedPAR file for its
cost analysis, but instead calculated a case volume based on
assumptions using the number of total live births in the United States.
In addition, we question the assumptions used in the cost analysis
regarding the potential Medicare volume for the technology. As noted in
the FDA clearance letter for this device,\189\ its intended patient
population is newborns, including preterm, and infants. The applicant
asserts that after a premature infant is delivered, the infant may be
eligible for Medicare coverage if it qualifies under specific criteria,
such as disability or end-stage renal disease (ESRD). Although we agree
that infants may be eligible for Medicare if they have ESRD and need
regular dialysis or have had a kidney transplant,\190\ we note that
Medicare Part A entitlement--for inpatient hospital services--based on
child disability benefit entitlement can never begin before the month
the person attains age 20 (or age 18 if the individual's disability is
Amyotrophic Lateral Sclerosis).\191\
---------------------------------------------------------------------------
\189\ https://www.accessdata.fda.gov/cdrh_docs/pdf23/K234088.pdf.
\190\ Centers for Medicare & Medicaid Services. End-stage renal
disease (https://www.medicare.gov/basics/end-stage-renal-disease,
accessed 1/16/2024).
\191\ Centers for Medicare & Medicaid Services. Original
Medicare (Part A and B) Eligibility and Enrollment (https://www.cms.gov/medicare/enrollment-renewal/health-plans/original-part-a-b, accessed 1/16/2024).
---------------------------------------------------------------------------
Furthermore, we are unclear how the average charge per case
(unstandardized with no case weight) was calculated as it is unclear
what claims data was used to determine the average charges for MS-DRG
790 and MS-DRG 791. We are also unclear as to the applicant's
methodology for calculating the average charge per case (unstandardized
with case weight), as it appears the applicant multiplied the average
charge per case (unstandardized with no case weight) by 5.6671 for the
charges in MS-DRG 790, and by 3.8704 for the charges in MS-DRG 791.
Although the applicant did not remove charges related to the
technology being replaced, we note that the applicant stated that
targeted fortification leads to a decreased length of stay (LOS) by 2.5
days, and we question if charges should be removed to account for the
decreased LOS for patients using this technology.
We are also unclear as to the applicant's methodology for
calculating the average standardized charge per case as the applicant
used the same values from the average charge per case (unstandardized
with case weight), which were the average charge per case
(unstandardized with no case weight) multiplied by 5.6671 for the
charges in MS-DRG 790, and by 3.8704 for the charges in MS-DRG 791.
To calculate the inflated average standardized charge per case, the
applicant applied an inflation factor of 1.04118 percent. We would be
interested in additional information regarding the basis for using this
inflation factor and how it corresponds to the source data and year
used for the cost analysis.
We note the applicant added direct and indirect charges related to
the new technology. However, although the applicant identified a cost-
to-charge ratio of 0.36 for intensive inpatient admission days, it is
unclear how this cost-to-charge ratio was used to convert costs for the
technology and indirect costs to charges, and how these charges were
calculated using the costs of the device itself or costs related to
additional time for training or measuring milk.
Therefore, because the applicant has not provided sufficient
information as part of its cost analysis to demonstrate that the
Emily's Care Nourish Test System (Model 1) meets the cost criterion, we
are proposing to disapprove new technology add-on payments for the
Emily's Care Nourish Test System (Model 1) for FY 2026. However, in the
event we receive updated information to establish that the Emily's Care
Nourish Test System (Model 1) meets the cost criterion, we are
providing the following information regarding the new technology add-on
payment.
We note the applicant states that the technology, which received
FDA clearance on May 3, 2024, is expected to be commercially available
May 1, 2025, and we would appreciate more information about the cause
for any delay in the commercial availability of the device following
FDA clearance.
We believe the relevant ICD-10-CM codes to identify the
Breakthrough Device-designated indication for use of the technology in
VLBW neonates and infants would be the following codes:
------------------------------------------------------------------------
ICD-10-CM code Description
------------------------------------------------------------------------
P05.01............................ Newborn light for gestational age,
less than 500 grams.
P05.02............................ Newborn light for gestational age,
500-749 grams.
P05.03............................ Newborn light for gestational age,
750-999 grams.
P05.04............................ Newborn light for gestational age,
1,000-1,249 grams.
P05.05............................ Newborn light for gestational age,
1,250-1,499 grams.
P05.11............................ Newborn small for gestational age,
less than 500 grams.
[[Page 18176]]
P05.12............................ Newborn small for gestational age,
500-749 grams.
P05.13............................ Newborn small for gestational age,
750-999 grams.
P05.14............................ Newborn small for gestational age,
1,000-1,249 grams.
P05.15............................ Newborn small for gestational age,
1,250-1,499 grams.
P07.00............................ Extremely low birth weight newborn,
unspecified weight.
P07.01............................ Extremely low birth weight newborn,
less than 500 grams.
P07.02............................ Extremely low birth weight newborn,
500-749 grams.
P07.03............................ Extremely low birth weight newborn,
750-999 grams.
P07.14............................ Other low birth weight newborn,
1,000-1,249 grams.
P07.15............................ Other low birth weight newborn,
1,250-1,499 grams.
------------------------------------------------------------------------
We are inviting public comments on the use of these ICD-10-CM
diagnosis codes to identify the Breakthrough Device-designated
indication for purposes of the new technology add-on payment, if
approved.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost to the
hospital for the Emily's Care Nourish Test System (Model 1) to be
$3,000 per patient before discounts and $1,800 after discounts, based
on the contents of the kit, which provides enough supplies for testing
over a typical NICU stay (36 tests). The applicant stated the contents
of the kit include: 36 test strips, pipettes, reference cards, 2
control solutions, and a reusable lightbox (iPhone not included). The
applicant also provided additional information on the costs for the
annual use of the technology to the hospital of $25,000, consisting of
$10,000 for the kit including the lease of the lightbox and iPhone, and
$15,000 for the device's operation (labor, testing milk, analysis
interpretation, adjustment of feeding protocols). However, we note that
the costs to the hospital, per patient, per inpatient stay remains
unclear, and that the provided costs also include additional costs
related to use of the device as well as capital costs for the lease of
the lightbox and iPhone.
As we have discussed in prior rulemaking, when determining a new
technology add-on payment, we provide payment based on the cost of the
actual technology (such as the drug or device itself) and not for
additional costs related to the use of the device (86 FR 45146).
Therefore, we would not include costs of staff labor for the device's
operation in the relevant costs for purposes of determining the new
technology add-on payment amount.
In addition, because section 1886(d)(5)(K)(i) of the Act requires
that the Secretary establish a mechanism to recognize the costs of new
medical services or technologies under the payment system established
under that subsection, which establishes the system for payment of the
operating costs of inpatient hospital services, we do not include
capital costs in the add-on payments for a new medical service or
technology or make new technology add-on payments under the IPPS for
capital-related costs (86 FR 45145). The costs to lease the lightbox
and iPhone are capital costs. As such, these components would not be
eligible for new technology add-on payment because, as discussed in
prior rulemaking and as noted, we only make new technology add-on
payments for operating costs (72 FR 47307 through 47308).
Without a breakdown of the costs of this technology to the
hospital, per patient, per inpatient stay, for the operating components
of the kit, we are unable to identify the relevant costs for purposes
of determining the new technology add-on payment amount. In addition,
the applicant had indicated that the cost of the device would be
discounted to hospitals, and the Medicare program expects providers to
take advantage of available discounts.\192\ It is unclear how potential
discounts would affect the relevant estimated operating costs of the
device. We would be interested in additional information regarding the
current or anticipated average cost of the technology to the hospital
per inpatient stay.
---------------------------------------------------------------------------
\192\ Medicare Department of Health & Human Services (DHHS)
Provider Reimbursement Manual Part 1--Chapter 8, Purchase Discounts;
Allowances; Refunds of Expenses (Date: March 8, 2013) https://www.cms.gov/regulations-and-guidance/guidance/transmittals/downloads/r456pr1.pdf.
---------------------------------------------------------------------------
We invite public comments on whether the Emily's Care Nourish Test
System (Model 1) meets the cost criterion and our proposal to
disapprove new technology add-on payments for the Emily's Care Nourish
Test System (Model 1) for FY 2026. We also invite public comments on
the operating costs for the device, in the event we receive updated
information to establish that the Emily's Care Nourish Test System
(Model 1) meets the cost criterion.
10. Esprit\TM\ BTK Everolimus Eluting Resorbable Scaffold System
The following table summarizes the information provided in the new
technology add-on payment application for the EspritTM BTK
Everolimus Eluting Resorbable Scaffold System.
BILLING CODE 4120-01-P
[[Page 18177]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.013
[[Page 18178]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.014
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant has received FDA marketing
authorization is included within the scope of the Breakthrough Device
designation indication, it appears that the FDA marketing authorization
is appropriate for consideration for new technology add-on payment
under the alternative pathway criteria.\193\
---------------------------------------------------------------------------
\193\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------
We agree with the applicant that the EspritTM BTK
Everolimus Eluting Resorbable Scaffold meets the cost criterion and are
therefore proposing to approve the EspritTM BTK Everolimus
Eluting Resorbable Scaffold for new technology add-on payments for FY
2026 for the indication of improving luminal diameter in infrapopliteal
lesions in patients with CLTI and total scaffolding length up to 170 mm
with a reference vessel diameter of >=2.5 mm and <=4 mm.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
EspritTM BTK Everolimus Eluting Resorbable Scaffold to the
hospital to be $6,000 per patient. According to the applicant, the
costs of the technology include the EspritTM BTK Scaffold
($2,750) and the EspritTM BTK Delivery System ($250). The
applicant stated that per the IDE Clinical Study, on average two
EspritTM BTK Everolimus Eluting Resorbable Scaffolds were
used per patient. We note that the cost information for this technology
may be updated in the final rule based on revised or additional
information CMS receives prior to the final rule. Under Sec.
412.88(a)(2), we limit new technology add-on payments to the lesser of
65 percent of the average cost of the technology, or 65 percent of the
costs in excess of the MS-DRG payment for the case. As a result, we are
proposing that the maximum new technology add-on payment for a case
involving the use of the EspritTM BTK Everolimus Eluting
Resorbable Scaffold would be $3,900 for FY 2026 (that is, 65 percent of
the average cost of the technology).
We invite public comments on whether the EspritTM BTK
Everolimus Eluting Resorbable Scaffold meets the cost criterion and our
proposal to approve new technology add-on payments for the
EspritTM BTK Everolimus Eluting Resorbable Scaffold for FY
2026.
11. EUROPA\TM\ Posterior Cervical Fusion System
The following table summarizes the information provided in the new
technology add-on payment application for the EUROPATM
Posterior Cervical Fusion System.
BILLING CODE 4120-01-P
[[Page 18179]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.015
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant has received FDA marketing
authorization is
[[Page 18180]]
included within the scope of the Breakthrough Device designation
indication, it appears that the FDA marketing authorization is
appropriate for consideration for new technology add-on payment under
the alternative pathway criteria.
According to the applicant, the technology, which received FDA
clearance on November 19, 2024, is not yet available for sale due to
project timelines. The applicant stated that the technology is not
expected to be commercially available until the fourth quarter of 2025.
We are interested in additional information regarding the cause of any
delay in the technology's market availability.
We agree with the applicant that the EUROPATM Posterior
Cervical Fusion System meets the cost criterion and are therefore
proposing to approve the EUROPATM Posterior Cervical Fusion
System for new technology add-on payments for FY 2026, to provide
immobilization and stabilization of spinal segments as an adjunct to
fusion for the acute and chronic instabilities of the cervical spine
(Cl to C7) and the upper thoracic spine (T1 to T3) listed in both the
Breakthrough Device designation and FDA clearance letter.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
EUROPATM Posterior Cervical Fusion System to the hospital to
be $123,920 per patient. According to the applicant, there are
approximately 374 different components associated with the technology,
including Pedicle Screws, Set Screws, Rods, and Connectors, all of
which are operating costs and new components. The applicant stated that
the majority of posterior cervical fusion procedures are inpatient
Medicare procedures in most hospitals, but there may be exceptions
based on individual clinical practice. Per the applicant, most of these
procedures are C1-T3 or C2-T3 with some exceptions being 2-3 levels.
The applicant calculated the total cost based on the unit prices of the
implants used in a construct (Rod $9,000.00; Pedicle Screw $5,000.00;
Smooth Shank Screw $5,000.00; Set Screw $500.00; Connector $4,000.00),
weighted by the length of the construct (1- through 9-level), and the
percentage of those procedures across different levels of fusion (10
percent for 2- through 4-level; 90 percent for 5 or more levels). We
note that the cost information for this technology may be updated in
the final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2)(ii)(B), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the EUROPATM Posterior Cervical Fusion System would be
$80,548 for FY 2026 (that is, 65 percent of the average cost of the
technology).
We invite public comments on whether the EUROPATM
Posterior Cervical Fusion System meets the cost criterion and our
proposal to approve new technology add-on payments for the
EUROPATM Posterior Cervical Fusion System for FY 2026.
12. iFuse TORQ TNTTM Implant System
The following table summarizes the information provided in the new
technology add-on payment application for the iFuse TORQ
TNTTM Implant System.
BILLING CODE 4120-01-P
[[Page 18181]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.016
[[Page 18182]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.017
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we note
that under the eligibility criteria for approval under the alternative
pathway for certain transformative devices, only the use of the
technology for the indication that corresponds to the technology's
Breakthrough Device designation would be eligible for the new
technology add-on payment for FY 2026. As noted by the applicant, the
FDA clearance describes an additional indication for sacroiliac joint
fusion for augmenting immobilization and stabilization of the
sacroiliac joint in skeletally mature patients undergoing sacropelvic
fixation as part of a lumbar or thoracolumbar fusion, which is not
included in the Breakthrough Device designation. Therefore, it appears
that this indication is not relevant for purposes of the new technology
add-on payment application for FY 2026.
Please see Table 10.2.--iFuse TORQ TNTTM Implant System
associated with this proposed rule for the list of ICD-10-PCS procedure
codes that we believe would be appropriate to exclude when reported in
combination with use of the iFuse TORQ TNTTM Implant System.
We are inviting public comments on the exclusion of cases reporting
these ICD-10-PCS procedure codes in combination with the procedure
codes that identify use of the iFuse TORQ TNTTM Implant
System for augmenting immobilization and stabilization of the
sacroiliac joint in skeletally mature patients undergoing sacropelvic
fixation as part of a lumbar or thoracolumbar fusion, which would not
be eligible for new technology add-on payment, if approved.
We agree with the applicant that the iFuse TORQ TNTTM
Implant System meets the cost criterion and are therefore proposing to
approve the iFuse TORQ TNTTM Implant System for new
technology add-on payments for FY 2026 when used for fracture fixation
of the pelvis, including acute, non-acute and nontraumatic fractures
and sacroiliac joint fusion for sacroiliac joint dysfunction including
sacroiliac joint disruption and degenerative sacroiliitis.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
iFuse TORQ TNTTM Implant System to the hospital to be $6,573
per patient. The applicant stated that the iFuse TORQ TNTTM
Implant System includes the operating unit costs of the TNT Implant
($3,150), Drill Bit ($200), Guide Pin ($100), Blunt Pin ($100), and
Washer ($50). The applicant estimated the average number of each
component used per case for pelvic fixation and sacroiliac joint fusion
cases separately, and calculated the costs of the new technology by
multiplying the component costs by the average number of components
used per case. The applicant used internal sales data to estimate the
percentages of pelvic fixation (80 percent) and sacroiliac joint (20
percent) fusion cases in an average hospital. The applicant then
calculated the total cost of the iFuse TORQ TNTTM Implant
System to the hospital by taking the weighted average of the cost per
pelvic fixation case and cost per sacroiliac joint fusion case.
It appears that the TNT Implant and Washers are components of the
Breakthrough device. However, the Drill Bit, Guide Pin, and Blunt Pin
are instrumentation used for the implantation of the TNT Implant. As we
have discussed in prior rulemaking, when determining a new technology
add-on payment, we provide payment based on the cost of the actual
technology (such as the drug or device itself) and not for additional
costs related to the use of the device (86 FR 45146). It appears that
the cost of the instrumentation (the Drill Bit, Guide Pin, and Blunt
Pin) are costs related to the use of the technology, rather than a cost
of the technology itself. In addition, it is not clear if the Drill
Bit, Guide Pin, and Blunt Pin are new and unique components for this
technology, or if they may be reused and/or may be purchased separately
in support of other technologies. Therefore, it appears any add-on
payment for the iFuse TORQ TNTTM Implant System would
include only the weighted average cost per pelvic fixation case and
cost per
[[Page 18183]]
sacroiliac joint fusion case of the TNT Implant and Washers ($6,093).
We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the iFuse TORQ TNTTM Implant System would be $3,960.45 for
FY 2026 (that is, 65 percent of the average cost of the technology).
We invite public comments on whether the iFuse TORQ
TNTTM Implant System meets the cost criterion and our
proposal to approve new technology add-on payments for the iFuse TORQ
TNTTM Implant System for FY 2026.
13. Merit Wrapsody[supreg] Cell Impermeable Endoprosthesis (CIE)
The following table summarizes the information provided in the new
technology add-on payment application for the Merit Wrapsody[supreg]
Cell Impermeable Endoprosthesis (CIE).
BILLING CODE 4120-01-P
[[Page 18184]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.018
[[Page 18185]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.019
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received PMA approval from FDA
is included within the scope of the Breakthrough Device designation
indication, it appears that the FDA-approved indication is appropriate
for consideration for new technology add-on payment under the
alternative pathway criteria.
We note that the application stated that commercialization of the
device was initiated on January 2, 2025, with 3 purchase orders in 3
days. We are interested in additional information regarding any delay
in commercial availability between its FDA approval on December 19,
2024, and the date commercialization was initiated, including if the
device was available for sale prior to January 2, 2025.
We agree with the applicant that the Merit Wrapsody[supreg] CIE
meets the cost criterion and are therefore proposing to approve the
Merit Wrapsody[supreg] CIE for new technology add-on payments for FY
2026, for use in hemodialysis patients for the treatment of stenosis or
occlusion within the dialysis access outflow circuit, including
stenosis or occlusion in the peripheral veins of individuals with an AV
fistula or at the venous anastomosis of a synthetic AV graft.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the cost of the Merit
Wrapsody[supreg] CIE to the hospital to be $5,800 per patient,
inclusive of all components and accessories. The applicant also
provided an additional cost for operating room time because the
facility operation room time may be 8-12 minutes greater than similar
current procedures. However, as discussed in prior rulemaking, when
determining a new technology add-on payment, we provide payment based
on the cost of the actual technology (such as the drug or device
itself) and not for additional costs related to the use of the device,
such as the ongoing use of the device including maintenance and
processing fees. For example, if a technology required an extra hour of
operating room time, or reduced the amount of procedure time, we would
neither add nor deduct costs based on this, and would only consider the
actual cost of the technology at the time of purchase in our
determination of the add-on payment (86 FR 45146).
We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the Merit Wrapsody[supreg] CIE would be $3,770 for FY 2026 (that is, 65
percent of the average cost of the technology).
We invite public comments on whether the Merit Wrapsody[supreg] CIE
meets the cost criterion and our proposal to approve new technology
add-on payments for the Merit Wrapsody[supreg] CIE for FY 2026.
14. Minima Stent System
The following table summarizes the information provided in the new
technology add-on payment application for the Minima Stent System.
BILLING CODE 4120-01-P
[[Page 18186]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.020
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received PMA approval from FDA
is included within the scope of the Breakthrough Device designation
indication, it appears that the FDA-approved indication is appropriate
for consideration for new technology add-on payment under the
alternative pathway criteria.\194\
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\194\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------
With respect to the cost criterion, we note that the applicant
identified 6 relevant MS-DRGs using 8 ICD-10-PCS codes that most
closely resemble the procedure to insert and/or dilate the great
vessels using the Minima Stent System. Per the applicant, the Minima
Stent System is used in the pediatric population and no cases appear in
Medicare data; therefore, the applicant used CY 2022 and CY 2023
Medicare charge and discharge data accessed via Definitive Healthcare
as well as data from the AOR/BOR File published as part of the FY 2025
IPPS/LTCH PPS final rule, correction notice and interim final action
with comment period Data and Supplemental Files and FY 2023 IPPS/LTCH
PPS final rule and correcting amendment files. However, we question
whether using the total charges for the Medicare claims within the 6
identified MS-DRGs would provide an accurate estimate for eligible
cases in a pediatric patient population where the Minima Stent System
would be used.
Subject to the applicant adequately addressing this concern, we
would agree that the technology meets the cost criterion and are
proposing to approve the Minima Stent System for new technology add-on
payments for FY 2026 for use in the treatment of native or acquired
pulmonary artery stenoses or coarctation of the aorta in neonates,
infants, and children at least 1.5 kg in weight.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
Minima Stent
[[Page 18187]]
System to the hospital to be $34,900 per patient. Per the applicant,
total cost per inpatient stay was calculated based on the assumption
that only one unit will be used per patient for each inpatient stay. We
note that the cost information for this technology may be updated in
the final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the Minima Stent System would be $22,685 for FY 2026 (that is, 65
percent of the average cost of the technology).
We invite public comments on whether the Minima Stent System meets
the cost criterion and our proposal to approve new technology add-on
payments for the Minima Stent System for FY 2026.
15. MY01 Continuous Compartmental Pressure Monitor
The following table summarizes the information provided in the new
technology add-on payment application for the MY01 Continuous
Compartmental Pressure Monitor.
BILLING CODE 4120-01-P
[[Page 18188]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.021
[[Page 18189]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.022
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant has received FDA marketing
authorization is included within the scope of the Breakthrough Device
designation indication, it appears that the FDA marketing authorization
is appropriate for consideration for new technology add-on payment
under the alternative pathway criteria.\195\
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\195\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
---------------------------------------------------------------------------
According to the applicant, the MY01 Mobile Application is not yet
available for use because the applicant is completing final testing of
the application before it is available for download. We are interested
in additional information on when the MY01 Continuous Compartmental
Pressure Monitor, which is the subject of this new technology add-on
payment application, became available for sale.
We agree with the applicant that the MY01 Continuous Compartmental
Pressure Monitor meets the cost criterion and are therefore proposing
to approve the MY01 Continuous Compartmental Pressure Monitor for new
technology add-on payments for FY 2026, for real-time and continuous
measurement of the muscle compartment pressure.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
MY01 Continuous Compartmental Pressure Monitor to the hospital to be
$3,250 per patient. Per the applicant, only one device is used per
inpatient stay, and the companion MY01 Mobile Application is provided
at no additional cost for any physician registered to use the device.
We note that the cost information for this technology may be updated in
the final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the MY01 Continuous Compartmental Pressure Monitor would be $2,112.50
for FY 2026 (that is, 65 percent of the average cost of the
technology).
We invite public comments on whether the MY01 Continuous
Compartmental Pressure Monitor meets the cost criterion and our
proposal to approve new technology add-on payments for the MY01
Continuous Compartmental Pressure Monitor for FY 2026.
16. Nelli Seizure Monitoring System
The following table summarizes the information provided in the new
technology add-on payment application for the Nelli Seizure Monitoring
System. We note that Neuro Event Labs, Inc. submitted an application
for new technology add-on payments for the Nelli Seizure Monitoring
System for FY 2023, as summarized in the FY 2023 IPPS/LTCH PPS proposed
rule (87 FR 28341 through 28342), but the technology did not meet the
applicable deadline for FDA approval or clearance of the technology
and, therefore, was not eligible for consideration for new technology
add-on payments for FY 2023 (87 FR 48960). We note that the applicant
also submitted an application for new technology add-on payments for FY
2024, as summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR
26940 through 26942), that it withdrew prior to the issuance of the FY
2024 IPPS/LTCH PPS final rule (88 FR 58919).
BILLING CODE 4120-01-P
[[Page 18190]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.023
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we agree
with the applicant that the Nelli Seizure Monitoring System meets the
cost
[[Page 18191]]
criterion and are therefore proposing to approve the Nelli Seizure
Monitoring System for new technology add-on payments for FY 2026,
subject to the technology receiving FDA marketing authorization for the
indication corresponding to the Breakthrough Device designation by May
1, 2025.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
Nelli Seizure Monitoring System to the hospital to be $1,000 per
patient for the cost of the analysis during the hospital visit. We note
that the cost information for this technology may be updated in the
final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the Nelli Seizure Monitoring System would be $650 for FY 2026 (that is,
65 percent of the average cost of the technology).
We invite public comments on whether the Nelli Seizure Monitoring
System meets the cost criterion and our proposal to approve new
technology add-on payments for the Nelli Seizure Monitoring System for
FY 2026, subject to the technology receiving FDA marketing
authorization for the indication corresponding to the Breakthrough
Device designation by May 1, 2025.
17. Positive Blood Culture (PBC) Separator With Selux AST System
The following table summarizes the information provided in the new
technology add-on payment application for the PBC Separator with Selux
AST System. We note that Selux Diagnostics, Inc. submitted an
application for new technology add-on payments for the PBC Separator
with Selux AST System for FY 2024 under the name Selux NGP System, as
summarized in the FY 2024 IPPS/LTCH PPS proposed rule (88 FR 26946
through 26949), that it withdrew prior to the issuance of the FY 2024
IPPS/LTCH PPS final rule (88 FR 58919).
BILLING CODE 4120-01-P
[[Page 18192]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.024
[[Page 18193]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.025
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received 510(k) clearance from
FDA is included within the scope of the Breakthrough Device designation
indication, it appears that the FDA-cleared indication is appropriate
for consideration for new technology add-on payment under the
alternative pathway criteria.
We agree with the applicant that the PBC Separator with Selux AST
System meets the cost criterion and are therefore proposing to approve
the PBC Separator with Selux AST System for new technology add-on
payments for FY 2026 for use as an automated inoculum preparation
system that uses lysis, centrifugation and sequential optical density
measurements to generate a McFarland equivalent suspension from
positive blood culture samples that can be used for quantitative in
vitro AST by the Selux AST System.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the PBC
Separator with Selux AST System to the hospital to be $135.04 per
patient. Per the applicant, the cost per patient includes $80 for the
Selux AST Gram Negative and Selux AST Gram Positive AST Kit, $50 for
the Selux AST Positive Blood Culture Kit, $4.79 for the Selux AST
Analyzer Reagent Kit, and $0.25 for the Selux AST Waste Kit.
We note that according to the applicant, the Selux AST System has
been granted multiple previous FDA clearances for a different
indication and sample type.\196\ However, per the applicant, the
Breakthrough Device designation is for the Selux Positive Blood Culture
Separator and Selux [AST] System. The previous FDA clearances for the
Selux AST System were not considered Breakthrough Devices. Therefore,
it appears that the components of the Selux AST System, including the
Selux AST Gram Negative and Selux AST Gram Positive AST Kit, Selux AST
Analyzer Reagent Kit, and Selux AST Waste Kit are eligible for new
technology add-on payment only when used in conjunction with the PBC
Separator on positive blood culture samples. We further note that the
Selux AST System first received FDA 510(k) clearance on January 18,
2023, and therefore the components of the Selux AST System would still
be new for FY 2026.
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\196\ https://www.accessdata.fda.gov/cdrh_docs/pdf21/K211759.pdf
and https://www.accessdata.fda.gov/cdrh_docs/pdf21/K211748.pdf.
---------------------------------------------------------------------------
We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2) we limit
new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the PBC Separator with Selux AST System would be $87.78 for FY 2026
(that is, 65 percent of the average cost of the technology).
We invite public comments on whether the PBC Separator with Selux
AST System meets the cost criterion and our proposal to approve new
technology add-on payments for the PBC Separator with Selux AST System
for FY 2026.
18. PearlMatrix P-15 Peptide Enhanced Bone Graft
The following table summarizes the information provided in the new
technology add-on payment application for the PearlMatrix P-15 Peptide
Enhanced Bone Graft.
BILLING CODE 4120-01-P
[[Page 18194]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.026
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we agree
with the applicant that the PearlMatrix P-15 Peptide Enhanced Bone
Graft
[[Page 18195]]
meets the cost criterion and are therefore proposing to approve the
PearlMatrix P-15 Peptide Enhanced Bone Graft for new technology add-on
payments for FY 2026, subject to the technology receiving FDA marketing
authorization for the indication corresponding to the Breakthrough
Device designation by May 1, 2025.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
PearlMatrix P-15 Peptide Enhanced Bone Graft to the hospital to be
$6,500 per patient, for one 10 cc kit used per inpatient stay. The
applicant provided the following cost breakdown of each component: bone
graft peptide ($3,120 operating cost and $780 capital cost), porcine
anorganic bone mineral ($780 operating cost and $195 capital cost), and
fibrous collagen matrix ($1,300 operating cost and $325 capital cost).
Because section 1886(d)(5)(K)(i) of the Act requires that the Secretary
establish a mechanism to recognize the costs of new medical services or
technologies under the payment system established under that
subsection, which establishes the system for payment of the operating
costs of inpatient hospital services, we do not include capital costs
in the add-on payments for a new medical service or technology or make
new technology add-on payments under the IPPS for capital-related costs
(86 FR 45145). As noted, the applicant stated, there are capital costs
of $1,300 for the bone graft peptide, porcine anorganic bone mineral,
and fibrous collagen matrix. Therefore, it appears that these costs are
not eligible for new technology add-on payment because, as discussed in
prior rulemaking and as noted, we only make new technology add-on
payments for operating costs (72 FR 47307 through 47308). We note that
any new technology add-on payment for the PearlMatrix P-15 Peptide
Enhanced Bone Graft would include only the operating costs of $5,200
for the bone graft peptide, porcine anorganic bone mineral, and fibrous
collagen matrix. We note that the cost information for this technology
may be updated in the final rule based on revised or additional
information CMS receives prior to the final rule. Any new technology
add-on payment for the PearlMatrix P-15 Peptide Enhance Bone Graft
would be subject to our policy under Sec. 412.88(a)(2) where we limit
new technology add-on payment to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the PearlMatrix P-15 Peptide Enhanced Bone Graft would be $3,380 for FY
2026 (that is, 65 percent of the average cost of the technology).
We invite public comments on whether the PearlMatrix P-15 Peptide
Enhanced Bone Graft meets the cost criterion and our proposal to
approve new technology add-on payments for the PearlMatrix P-15 Peptide
Enhanced Bone Graft for FY 2026, subject to the technology receiving
FDA marketing authorization for the indication corresponding to the
Breakthrough Device designation by May 1, 2025.
19. Provizio[supreg] SEM Scanner
The following table summarizes the information provided in the new
technology add-on payment application for the Provizio[supreg] SEM
Scanner.
BILLING CODE 4120-01-P
[[Page 18196]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.027
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we agree
with the applicant that the Provizio[supreg] SEM Scanner meets the cost
criterion and are therefore proposing to approve the Provizio[supreg]
SEM Scanner for new technology add-on payments for FY 2026, subject to
the technology receiving FDA marketing authorization for the indication
corresponding to the Breakthrough Device designation by May 1, 2025.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
Provizio[supreg] SEM Scanner to the hospital to be $631.84 per patient,
based on the cost of the
[[Page 18197]]
Single-Use Disposable Provizio[supreg] SEM Sensor ($17.95) with a two-
scan frequency per day, and an anticipated average length of stay (LOS)
of 17.6 days. Per the applicant, the average LOS was determined by
analyzing the FY2023 MedPAR data, and the weighted average LOS for all
MS-DRGs (765 DRGs) was 5.1 days. According to the applicant, the
average LOS for MS-DRGs (444 MS-DRGs) with patients who developed
sacral and heel pressure ulcers (PUs) during the stay was 24.9 days,
and the average LOS for the same MS-DRGs for cases without PUs was 10.3
days. The applicant expected that the LOS for these MS-DRGs would be
reduced from 24.9 to 10.3 days for patients using the device. The
applicant noted that the MedPAR data describes the number of cases with
PUs, and that it is possible that individual patients may have multiple
PUs, such as at the sacrum and heel. Per the applicant, in these cases,
the scanner would be used on the remaining anatomies at risk of PUs
through the average LOS of 24.9 days. Per the applicant, the midpoint
between the average LOS for cases without PUs and cases with PUs is
17.6 days. We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Any new technology add-on payment
for the Provizio[supreg] SEM Scanner would be subject to our policy
under Sec. 412.88(a)(2) where we limit new technology add-on payment
to the lesser of 65 percent of the average cost of the technology, or
65 percent of the costs in excess of the MS-DRG payment for the case.
As a result, we are proposing that the maximum new technology add-on
payment for a case involving the use of the Provizio[supreg] SEM
Scanner would be $410.70 for FY 2026 (that is, 65 percent of the
average cost of the technology).
We invite public comments on whether the Provizio[supreg] SEM
Scanner meets the cost criterion and our proposal to approve new
technology add-on payments for the Provizio[supreg] SEM Scanner for FY
2026, subject to the technology receiving FDA marketing authorization
for the indication corresponding to the Breakthrough Device designation
by May 1, 2025.
20. RECELL[supreg] Autologous Cell Harvesting Device
The following table summarizes the information provided in the new
technology add-on payment application for the RECELL[supreg] Autologous
Cell Harvesting Device.
BILLING CODE 4120-01-P
[[Page 18198]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.028
[[Page 18199]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.029
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we note
that the RECELL[supreg] Autologous Cell Harvesting Device is also
indicated for acute partial-thickness thermal burn wounds and acute
full-thickness thermal burn wounds. However, we note that under the
eligibility criteria for approval under the alternative pathway for
certain transformative devices, only the use of the technology for the
indication that corresponds to the technology's Breakthrough Device
designation would be eligible for the new technology add-on payment for
FY 2026. Therefore, only the use of the RECELL[supreg] Autologous Cell
Harvesting Device for acute nonthermal full thickness skin wounds after
traumatic avulsion, surgical excision (for example, necrotizing soft
tissue infection), or resection (for example, skin cancer), and the FDA
Breakthrough Device designation it received for those uses, are
relevant for purposes of the new technology add-on payment application
for FY 2026.
Please see Table 10.1.A.-RECELL[supreg] Autologous Cell Harvesting
Device associated with this proposed rule for the list of relevant ICD-
10-CM diagnosis codes that we believe would identify the Breakthrough
Device-designated indication of acute nonthermal full thickness skin
wounds after traumatic avulsion. Please see Table 10.1.B.-
RECELL[supreg] Autologous Cell Harvesting Device associated with this
proposed rule for the list of relevant ICD-10-PCS procedure codes that
we believe would be appropriate to report in combination with use of
the RECELL[supreg] Autologous Cell Harvesting Device to identify use of
the technology for the Breakthrough Device-designated indication of
acute nonthermal full thickness skin wounds after surgical excision
(for example, necrotizing soft tissue infection) or resection (for
example, skin cancer). We are inviting public comments on the use of
these ICD-10-CM diagnosis and ICD-10-PCS procedure codes to identify
use of the technology for the Breakthrough Device-designated
indications for purposes of the new technology add-on payment, if
approved.
We agree with the applicant that the RECELL[supreg] Autologous Cell
Harvesting Device meets the cost criterion and are therefore proposing
to approve the RECELL[supreg] Autologous Cell Harvesting Device for new
technology add-on payments for FY 2026, when used in combination with
meshed autografting for acute full-thickness thermal burn wounds in
pediatric and adult patients and full-thickness skin defects after
traumatic avulsion (for example, degloving) or surgical excision (for
example, necrotizing soft tissue infection) or resection (for example,
skin cancer).
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
RECELL[supreg] Autologous Cell Harvesting Device to the hospital to be
$7,500 per device. The applicant estimated that, on average, one device
is used per inpatient stay for patients with a full-thickness skin
defect. We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the RECELL[supreg] Autologous Cell Harvesting Device would be $4,875
for FY 2026 (that is, 65 percent of the average cost of the
technology).
We invite public comments on whether the RECELL[supreg] Autologous
Cell Harvesting Device meets the cost criterion and our proposal to
approve new technology add-on payments for the RECELL[supreg]
Autologous Cell Harvesting Device for FY 2026.
21. Restor3d TIDALTM Fusion Cage
The following table summarizes the information provided in the new
[[Page 18200]]
technology add-on payment application for the restor3d
TIDALTM Fusion Cage. We note that restor3d submitted an
application for new technology add-on payments for the restor3d
TIDALTM Fusion Cage for FY 2025, as summarized in the FY
2025 IPPS/LTCH PPS proposed rule (89 FR 36124 through 36125), that it
withdrew prior to the issuance of the FY 2025 IPPS/LTCH PPS final rule
(89 FR 69204).
BILLING CODE 4120-01-P
[[Page 18201]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.030
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we agree
with the applicant that the restor3d TIDALTM Fusion Cage
meets the cost criterion and are therefore proposing to approve the
restor3d TIDALTM Fusion
[[Page 18202]]
Cage for new technology add-on payments for FY 2026 subject to the
technology receiving FDA marketing authorization for the indication
corresponding to the Breakthrough Device designation by May 1, 2025.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the cost of the restor3d
TIDALTM Fusion Cage to the hospital to be $27,995 per
patient. In addition, the applicant noted the costs related to the
technology for required supporting instruments and materials consist of
one unit each of the Instrument Kit ($6,995), TTC Fusion Nail ($7,500),
and Graft Material ($1,500). The applicant estimated the total cost to
the hospital to be $43,990 for each procedure per patient, including
the related cost of the technology. As we discussed in the FY 2025
IPPS/LTCH PPS proposed rule (89 FR 36125) and in prior rulemaking, when
determining a new technology add-on payment, we provide payment based
on the cost of the actual technology (such as the drug or device
itself) and not for additional costs related to the use of the device
(86 FR 45146). Based on the information provided by the applicant, the
cost of the Instrument Kit is included in the costs of the supporting
instruments and materials for each procedure related to the use of the
technology, rather than the cost of the technology itself. In addition,
it appears that the TTC Fusion Nail and Bone Graft are not new and
unique components for this technology and can be purchased separately
in support of other technologies. Furthermore, we note that the
Instrument Kit is not included in the Breakthrough Device designation,
and it therefore appears that only the restor3d TIDALTM
Fusion Cage would be designated as the Breakthrough Device once market
authorized and would be eligible for new technology add-on payments
under the alternative pathway. Therefore, it appears any add-on payment
for the restor3d TIDALTM Fusion Cage would include only the
cost of the restor3d TIDALTM Fusion Cage ($27,995).
We note that the cost information for this technology may be
updated in the final rule based on revised or additional information
CMS receives prior to the final rule. Under Sec. 412.88(a)(2), we
limit new technology add-on payments to the lesser of 65 percent of the
average cost of the technology, or 65 percent of the costs in excess of
the MS-DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the restor3d TIDALTM Fusion Cage would be $18,196.75 for FY
2026 (that is, 65 percent of the average cost of the technology).
We invite public comments on whether the restor3d
TIDALTM Fusion Cage meets the cost criterion and our
proposal to approve new technology add-on payments for the restor3d
TIDALTM Fusion Cage for FY 2026, subject to the technology
receiving FDA marketing authorization for the indication corresponding
to the Breakthrough Device designation by May 1, 2025.
22. ShortCutTM
The following table summarizes the information provided in the new
technology add-on payment application for the ShortCutTM.
BILLING CODE 4120-01-P
[[Page 18203]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.031
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we agree
with the applicant that the ShortCutTM meets the cost
criterion and are therefore proposing to approve the
ShortCutTM for new technology add-on payments for FY 2026
for use as a splitting device of bioprosthetic aortic valve leaflets to
facilitate valve-in-valve procedures for patients at risk for coronary
obstruction.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
ShortCutTM to the hospital to be $15,000 per patient. We
note that the cost information for this technology may be updated in
the final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2), we limit new
technology add-on payments to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case. As a result, we are proposing that the
maximum new technology add-on payment for a case involving the use of
the ShortCutTM would be $9,750 for FY 2026 (that is, 65
percent of the average cost of the technology).
We invite public comments on whether the ShortCutTM
meets the cost criterion and our proposal to approve new technology
add-on payments for the ShortCutTM for FY 2026.
23. Spur Peripheral Retrievable Stent System
The following table summarizes the information provided in the new
technology add-on payment application for the Spur Peripheral
Retrievable Stent System.
BILLING CODE 4120-01-P
[[Page 18204]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.032
BILLING CODE 4120-01-C
After review of the information provided by the applicant, with
regard to the cost criterion, we note that the applicant provided a
list of ICD-10-CM codes to identify indications relevant to use of the
technology for patients with de novo or restenotic lesions in the
infrapopliteal arteries. However, in the cost analysis, the applicant
used only ICD-10-PCS codes to identify eligible cases. We question
whether using a combination of ICD-10-CM and ICD-10-PCS codes would
more accurately identify eligible cases.
Subject to the applicant adequately addressing this concern, we
would agree that the Spur Peripheral Retrievable Stent System meets the
cost criterion and are therefore proposing to approve the Spur
Peripheral Retrievable Stent System for new technology add-on payments
for FY 2026, subject to the technology receiving FDA marketing
authorization for the indication corresponding to the Breakthrough
Device designation by May 1, 2025.
The applicant has not provided an estimate for the cost of the Spur
Peripheral Retrievable Stent System at the time of this proposed rule.
We expect the applicant to submit cost information prior to the final
rule, and we will provide an update regarding the new technology add-on
payment amount for the technology, if approved, in the final rule. Any
new technology add-on payment for the Spur Peripheral Retrievable Stent
System would be subject to our policy under Sec. 412.88(a)(2) where we
limit new
[[Page 18205]]
technology add-on payment to the lesser of 65 percent of the average
cost of the technology, or 65 percent of the costs in excess of the MS-
DRG payment for the case.
We invite public comments on whether the Spur Peripheral
Retrievable Stent System meets the cost criterion and our proposal to
approve new technology add-on payments for the Spur Peripheral
Retrievable Stent System for FY 2026, subject to the technology
receiving FDA marketing authorization for the indication corresponding
to the Breakthrough Device designation by May 1, 2025.
24. The WiSE CRT System
The following table summarizes the information provided in the new
technology add-on payment application for The WiSE CRT System.
BILLING CODE 4120-01-P
[[Page 18206]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.033
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we agree
with the applicant that The WiSE CRT System meets the cost criterion
and are therefore proposing to approve The WiSE CRT System for new
technology add-on payments for FY 2026, subject to the technology
receiving FDA marketing authorization for the indication corresponding
to the Breakthrough Device designation by May 1, 2025.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of The
WiSE CRT System to the hospital to be $63,300 per patient. The
components include the electrode
[[Page 18207]]
and catheter ($21,970), the delivery sheath ($2,590), the battery
($12,870), and the transmitter ($25,870). We note that the cost
information for this technology may be updated in the final rule based
on revised or additional information CMS receives prior to the final
rule. Under Sec. 412.88(a)(2), we limit new technology add-on payments
to the lesser of 65 percent of the average cost of the technology, or
65 percent of the costs in excess of the MS-DRG payment for the case.
As a result, we are proposing that the maximum new technology add-on
payment for a case involving the use of The WiSE CRT System would be
$41,145 for FY 2026 (that is, 65 percent of the average cost of the
technology).
We invite public comments on whether The WiSE CRT System meets the
cost criterion and our proposal to approve new technology add-on
payments for The WiSE CRT System for FY 2026, subject to the technology
receiving FDA marketing authorization for the indication corresponding
to the Breakthrough Device designation by May 1, 2025.
25. TriVerity Test
The following table summarizes the information provided in the new
technology add-on payment application for the TriVerity Test.
BILLING CODE 4120-01-P
[[Page 18208]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.034
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we note
the applicant stated that the technology was not commercially available
immediately
[[Page 18209]]
after FDA clearance. We are interested in additional information
regarding the cause of any delay in the technology's commercial
availability, including the significance of building up TriVerity
cartridge inventory on its availability for routine clinical use.
With regard to the cost criterion, the applicant stated the
technology is used as an aid to differentiate bacterial infections,
viral infections, and non-infectious illness, as well as the likelihood
of disease progression in adult patients. However, the applicant
included diagnosis codes related to sepsis of newborn in the second
cost criterion analysis. We question whether diagnosis codes related to
newborns are applicable to this technology because it is indicated for
use in adult patients, and whether the applicant should remove these
diagnosis codes to identify eligible cases more accurately.
Subject to the applicant adequately addressing this concern, we
would agree that the technology meets the cost criterion and propose to
approve the TriVerity Test for new technology add-on payments for FY
2026, for use in conjunction with clinical assessments and other
laboratory findings as an aid to differentiate bacterial infections,
viral infections, and non-infectious illness, as well as to determine
the likelihood of 7-day need for mechanical ventilation, vasopressors,
and/or renal replacement therapy in adult patients with suspected acute
infection or suspected sepsis presenting to the emergency department.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
TriVerity Test to the hospital to be $388 per patient. The applicant
stated that there would be two components for the operating cost of the
technology: the TriVerity Cartridge ($375) and the PAXgene Blood RNA
Tube ($13). Per the applicant, the PAXgene Blood RNA Tube is an FDA-
cleared tube distributed by BD and is a necessary component for
hospitals to use the TriVerity Test. The applicant stated that
hospitals can purchase the PAXgene Blood RNA Tubes directly from BD or
from the applicant. Although the applicant stated that the PAXgene
Blood RNA Tube is a new component of the device, we note that the
PAXgene Blood RNA Tube is also commercially available for other uses as
a standalone sample collection device, and received FDA marketing
authorization as early as April 18, 2005.\197\ Therefore, it appears
that only the cost of the TriVerity Cartridge is appropriate for
consideration for new technology add-on payment. We note that the cost
information for this technology may be updated in the final rule based
on revised or additional information CMS receives prior to the final
rule. Under Sec. 412.88(a)(2), we limit new technology add-on payments
to the lesser of 65 percent of the average cost of the technology, or
65 percent of the costs in excess of the MS-DRG payment for the case.
As a result, we are proposing that the maximum new technology add-on
payment for a case involving the use of the TriVerity Test would be
$243.75 for FY 2026 (that is, 65 percent of the average cost of the
technology).
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\197\ https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpmn/denovo.cfm?id=DEN050003.
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We invite public comments on whether the TriVerity Test meets the
cost criterion and our proposal to approve new technology add-on
payments for the TriVerity Test for FY 2026.
26. Ventura[supreg] Interatrial Shunt System
The following table summarizes the information provided in the new
technology add-on payment application for the Ventura[supreg]
Interatrial Shunt System.
BILLING CODE 4120-01-P
[[Page 18210]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.035
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we note
that with regard to the unique ICD-10-PCS procedure code used to
identify the use
[[Page 18211]]
of this technology, the applicant stated that ICD-10-PCS procedure code
02173J6 (Bypass left atrium to right atrium with synthetic substitute,
percutaneous approach) describes implantation of an interatrial shunt.
The applicant stated that it expects the Ventura[supreg] Interatrial
Shunt System to be the first interatrial shunt to receive FDA approval
and that it therefore will be the only technology reported under this
code. However, we believe that other technologies currently in clinical
trials may also be able to be reported using this code. Therefore, we
believe that the ICD-10-CM diagnosis code Z00.6 (Encounter for
examination for normal comparison and control in clinical research
program) should be used in combination with the ICD-10-PCS procedure
code 02173J6 to exclude new technology add-on payment for cases
involving technologies that are used in clinical trial settings, as
costs for the investigational item or service, itself unless otherwise
covered outside of the clinical trial, are not covered by Medicare
under the routine costs of a clinical trial.\198\ We are inviting
public comments on the use of this ICD-10-CM diagnosis code to exclude
cases involving technologies that are used in clinical trial settings,
which would not be eligible for the new technology add-on payment, if
approved.
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\198\ Routine Costs in Clinical Trials 310.1 (Effective Date of
this Version 05/27/2024) https://www.cms.gov/medicare-coverage-database/view/ncd.aspx?ncdid=1&ncdver=3&.
---------------------------------------------------------------------------
We agree with the applicant that the Ventura[supreg] Interatrial
Shunt System meets the cost criterion and are therefore proposing to
approve the Ventura[supreg] Interatrial Shunt System for new technology
add-on payments for FY 2026 subject to the technology receiving FDA
marketing authorization for the indication corresponding to the
Breakthrough Device designation by May 1, 2025.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
Ventura[supreg] Interatrial Shunt System to the hospital to be $34,000
per device, and one unit of the shunt system would be furnished during
an inpatient stay. The components include the Ventura[supreg]
Interatrial Shunt ($32,000) and the Ventura[supreg] Interatrial Shunt
Delivery System ($2,000). We note that the cost information for this
technology may be updated in the final rule based on revised or
additional information CMS receives prior to the final rule. Under
Sec. 412.88(a)(2), we limit new technology add-on payments to the
lesser of 65 percent of the average cost of the technology, or 65
percent of the costs in excess of the MS-DRG payment for the case. As a
result, we are proposing that the maximum new technology add-on payment
for a case involving the use of the Ventura[supreg] Interatrial Shunt
System would be $22,100 for FY 2026 (that is, 65 percent of the average
cost of the technology).
We invite public comments on whether the Ventura[supreg]
Interatrial Shunt System meets the cost criterion and our proposal to
approve new technology add-on payments for the Ventura[supreg]
Interatrial Shunt System for FY 2026, subject to the technology
receiving FDA marketing authorization for the indication corresponding
to the Breakthrough Device designation by May 1, 2025.
27. VITEK[supreg] REVEALTM AST System
The following table summarizes the information provided in the new
technology add-on payment application for the VITEK[supreg]
REVEALTM AST System.
BILLING CODE 4120-01-P
[[Page 18212]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.036
[[Page 18213]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.037
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received 510(k) clearance is
included within the scope of the Breakthrough Device designation
indication, it appears that the FDA-cleared indication is appropriate
for consideration for new technology add-on payment under the
alternative pathway criteria.\199\
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\199\ Breakthrough Devices Program https://www.fda.gov/medical-devices/how-study-and-market-your-device/breakthrough-devices-program.
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We note the applicant stated the device was not commercially
available until October 21, 2024, due to lead times in the supply chain
and implementation of system modifications due to FDA requirements. We
are interested in additional information regarding the cause for any
delay in the technology's commercial availability, as it received FDA
clearance on June 20, 2024, and it is not clear how lead times in the
supply chain affected its availability on the market and what system
modifications were required.
We agree with the applicant that the VITEK[supreg]
REVEALTM AST System meets the cost criterion and are
therefore proposing to approve the VITEK[supreg] REVEALTM
AST System for new technology add-on payments for FY 2026, indicated
for susceptibility testing direct from positive blood culture samples
signaled positive by a continuous monitoring blood culture system and
confirmed to contain gram-negative bacilli by Gram stain.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipated the total cost of the
VITEK[supreg] REVEALTM AST System to the hospital to be $125
per patient for the VITEK[supreg] REVEALTM Sensor Array. Per
the applicant, while there are additional capital costs for the
technology, these costs were not included in the device's cost to the
hospital per patient per inpatient stay. We note that the cost
information for this technology may be updated in the final rule based
on revised or additional information CMS receives prior to the final
rule. Under Sec. 412.88(a)(2), we limit new technology add-on payments
to the lesser of 65 percent of the average cost of the technology, or
65 percent of the costs in excess of the MS-DRG payment for the case.
As a result, we are proposing that the maximum new technology add-on
payment for a case involving the use of the VITEK[supreg]
REVEALTM AST System would be $81.25 for FY 2026 (that is, 65
percent of the average cost of the technology).
We invite public comments on whether the VITEK[supreg]
REVEALTM AST System meets the cost criterion and our
proposal to approve new technology add-on payments for the
VITEK[supreg] REVEALTM AST System for FY 2026.
b. Alternative Pathways for Qualified Infectious Disease Products
(QIDPs)
1. EMBLAVEOTM (Aztreonam-Avibactam)
The following table summarizes the information provided in the new
technology add-on payment application for EMBLAVEOTM (also
referred to as ATM-AVI).
BILLING CODE 4120-01-P
[[Page 18214]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.038
BILLING CODE 4120-01-C
After review of the information provided by the applicant, since
the indication for which the applicant received NDA approval is
included within the scope of the QIDP designation indication, it
appears that the FDA-approved indication is appropriate for
consideration for new technology add-on payment under the alternative
pathway criteria.
We note that the applicant stated that the technology is expected
to be commercially available by Q3 of CY 2025 due to product
availability. We are interested in additional information regarding the
cause for any delay in the technology's market availability as the
technology received FDA approval on February 7, 2025.
We agree with the applicant that EMBLAVEOTM meets the
cost criterion and are therefore proposing to approve
EMBLAVEOTM for new technology add-on payments for FY 2026
for use in patients 18 years and older who have limited or no
alternative options for the treatment of cIAI.
The applicant has not provided an estimate for the cost of
EMBLAVEOTM at the time of this proposed rule. We expect the
applicant to submit cost information prior to the final rule, and we
will provide an update regarding the new technology add-on payment
amount for the technology, if approved, in the final rule. Any new
technology add-on payment for EMBLAVEOTM would be subject to
our policy under Sec. [thinsp]412.88(a)(2)(ii)(B) where we limit new
technology add-on payment for QIDPs to the lesser of 75 percent of the
average cost of the technology, or 75 percent of the costs in excess of
the MS-DRG payment for the case.
We invite public comments on whether EMBLAVEOTM meets
the cost criterion and our proposal to approve new technology add-on
payments for EMBLAVEOTM for FY 2026.
2. CONTEPOTM (Fosfomycin)
The following table summarizes the information provided in the new
technology add-on payment application for CONTEPOTM
(fosfomycin). We note
[[Page 18215]]
that Nabriva Therapeutics submitted an application for
CONTEPOTM for FY 2021 and FY 2022, as summarized in the FY
2021 and FY 2022 IPPS/LTCH PPS proposed rules (85 FR 32682 through
32683; 86 FR 25390 through 25392), and received conditional approval
subject to the technology receiving FDA marketing authorization before
July 1 of the particular fiscal year for which the applicant applied
for new technology add-on payments (85 FR 58723 through 58725; 86 FR
45154 through 45155). CONTEPOTM did not receive FDA
marketing authorization by the applicable July 1 deadlines, and was
therefore not eligible for new technology add-on payments for FY 2021
or FY 2022 (86 FR 44972; 87 FR 48909).
Per the applicant, Meitheal Pharmaceuticals Inc. has acquired the
rights to CONTEPOTM in the U.S. and is submitting the new
technology add-on payment application for FY 2026.
BILLING CODE 4120-01-P
[[Page 18216]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.039
[[Page 18217]]
[GRAPHIC] [TIFF OMITTED] TP30AP25.040
BILLING CODE 4120-01-C
After review of the information provided by the applicant, we note
the applicant states that the technology is expected to be commercially
available within 3 months of FDA approval, and we would appreciate more
information on the reasons for any delay in the commercial availability
of CONTEPOTM following FDA approval.
We agree with the applicant that CONTEPOTM meets the
cost criterion and are therefore proposing to approve
CONTEPOTM for new technology add-on payments for FY 2026,
subject to the technology receiving FDA marketing authorization for the
indication corresponding to the QIDP designation by July 1, 2025. As an
application submitted under the alternative pathway for certain
antimicrobial products at Sec. 412.87(d), CONTEPOTM is
eligible for conditional approval for new technology add-on payments if
it does not receive FDA marketing authorization by July 1, 2025,
provided that the technology receives FDA marketing authorization
before July 1 of the fiscal year for which the applicant applied for
new technology add-on payments (that is, July 1, 2026), as provided in
Sec. 412.87(f)(3). If CONTEPOTM receives FDA marketing
authorization before July 1, 2026, the new technology add-on payment
for cases involving the use of this technology would be made effective
for discharges beginning in the first quarter after FDA marketing
authorization is granted. If FDA marketing authorization is received on
or after July 1, 2026, no new technology add-on payments would be made
for cases involving the use of CONTEPOTM for FY 2026.
Based on preliminary information from the applicant at the time of
this proposed rule, the applicant anticipates the total cost of
CONTEPOTM to the hospital to be $11,700 per patient. The
applicant estimated that each vial costs $325 and that 3 doses are
needed each day for an average treatment duration of 12 days. We note
that the cost information for this technology may be updated in the
final rule based on revised or additional information CMS receives
prior to the final rule. Under Sec. 412.88(a)(2)(ii)(B), we limit new
technology add-on for technologies designated as QIDPs to the lesser of
75 percent of the average cost of the technology, or 75 percent of the
costs in excess of the MS-DRG payment for the case. As a result, we are
proposing that the maximum new technology add-on payment for a case
involving the use of CONTEPOTM would be $8,775 for FY 2026
(that is, 75 percent of the average cost of the technology).
We invite public comments on whether CONTEPOTM meets the
cost criterion and our proposal to approve new technology add-on
payments for CONTEPOTM for FY 2026, subject to the
technology receiving FDA marketing authorization consistent with its
QIDP designation by July 1, 2025.
III. Proposed Changes to the Hospital Wage Index for Acute Care
Hospitals
A. Background
1. Legislative Authority
Section 1886(d)(3)(E) of the Act requires that, as part of the
methodology for determining prospective payments to hospitals, the
Secretary adjust the standardized amounts for area differences in
hospital wage levels by a factor (established by the Secretary)
reflecting the relative hospital wage level in the geographic area of
the hospital compared to the national average hospital wage level. We
currently define hospital labor market areas based on the delineations
of statistical areas established by the Office of Management and Budget
(OMB). A discussion of the proposed FY 2026 hospital wage index based
on the statistical areas appears under section III.B. of the preamble
of this proposed rule.
Section 1886(d)(3)(E) of the Act requires the Secretary to update
the wage index annually and to base the update on a survey of wages and
wage-related costs of short-term, acute care hospitals. CMS collects
these data on the Medicare cost report, CMS Form 2552-10, Worksheet S-
3, Parts II, III, IV. The aforementioned information collection
requirements are in Worksheet S-3, Parts II, III, IV. of the
information collection request titled ``Hospitals and Health Care
Complex Cost Report (CMS Form 2552-10)''. The information collection
request is currently approved under OMB control number is 0938-0050 and
has a September 30, 2025, expiration date. We plan to submit the
information collection request to OMB for reapproval in the near
future. In accordance with the PRA, the resubmission process will be
announced in the Federal Register providing the public with the
requisite notice and comment periods which will be separate from those
associated with this rulemaking. Section 1886(d)(3)(E) of the Act also
requires that any updates or adjustments to the wage index be made in a
manner that ensures that aggregate payments to hospitals are not
affected by the change in the wage index. The proposed adjustment for
FY 2026 is discussed in section II.B. of the Addendum to this proposed
rule.
As discussed in section III.I. of the preamble of this proposed
rule, we also take into account the geographic reclassification of
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of
the Act when calculating IPPS payment amounts. Under section
1886(d)(8)(D) of the Act, the Secretary is required to adjust the
standardized amounts so as to ensure that aggregate payments under the
IPPS after implementation of the provisions of sections 1886(d)(8)(B),
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate
prospective payments that would have been made absent these provisions.
The proposed budget neutrality adjustment for FY 2026 is discussed in
section II.A.4.b. of the Addendum to this proposed rule.
[[Page 18218]]
Section 1886(d)(3)(E) of the Act also provides for the collection
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program to
construct an occupational mix adjustment to the wage index. The
information collection request is currently approved under OMB control
number is 0938-0907 and has a September 30, 2025, expiration date. We
plan to submit the information collection request to OMB for reapproval
in the near future. In accordance with the PRA, the resubmission
process will be announced in the Federal Register providing the public
with the requisite notice and comment periods which will be separate
from those associated with this rulemaking. A discussion of the
occupational mix adjustment that we are proposing to apply to the FY
2026 wage index appears under section III.E. of the preamble of this
proposed rule.
2. Core-Based Statistical Areas (CBSAs) for the Proposed FY 2026
Hospital Wage Index
The wage index is calculated and assigned to hospitals on the basis
of the labor market area in which the hospital is located. Under
section 1886(d)(3)(E) of the Act, beginning with FY 2005 (69 FR 49026
through 49032), we delineate hospital labor market areas based on OMB-
established Core-Based Statistical Areas (CBSAs). In the July 16, 2021,
Federal Register (86 FR 37777), OMB finalized a schedule for future
updates based on results of the decennial Census updates to commuting
patterns from the American Community Survey (ACS). In accordance with
that schedule, on July 21, 2023, OMB released Bulletin No. 23-01. The
current statistical areas (which were implemented beginning with FY
2025) are based on revised OMB delineations issued on July 21, 2023, in
OMB Bulletin No. 23-01. According to OMB, the delineations reflect the
2020 Standards for Delineating Core Based Statistical Areas (``the 2020
Standards''), which appeared in the Federal Register on July 16, 2021
(86 FR 37770 through 37778), and the application of those standards to
Census Bureau population and journey-to-work data (that is, 2020
Decennial Census, the ACS, and Census Population Estimates Program
data) (we refer to these revised OMB delineations as the ``new OMB
delineations'' in this proposed rule). A copy of OMB Bulletin No. 23-01
may be obtained at https://bidenwhitehouse.archives.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf. We refer readers to the FY 2025
IPPS/LTCH PPS final rule (89 FR 69253 through 69266) for a full
discussion of our implementation of the new OMB delineations for the FY
2025 wage index. For FY 2026, we are proposing to continue using the
new OMB delineations that we adopted beginning with FY 2025 to
calculate the area wage indexes and the transition periods, which we
discuss below.
3. Codes for Constituent Counties in CBSAs
CBSAs are made up of one or more constituent counties. Each CBSA
and constituent county has its own unique identifying codes. The
Federal Information Processing Standard (FIPS) county codes are
maintained by the U.S. Census Bureau. In the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38129 through 38130), we adopted a policy to use the
FIPS county codes for purposes of crosswalking counties to CBSAs. In
addition, in the same rule, we implemented the latest FIPS code
updates, which were effective October 1, 2017, beginning with the FY
2018 wage indexes. These updates have been used to calculate the wage
indexes in a manner generally consistent with the CBSA-based
methodologies finalized in the FY 2005 IPPS final rule and the FY 2015
IPPS/LTCH PPS final rule. We refer the reader to the FY 2018 IPPS/LTCH
PPS final rule (82 FR 38129 through 38130) for a complete discussion of
our adoption of FIPS county codes. For FY 2026, we are proposing to
continue to use only the FIPS county codes for purposes of crosswalking
counties to CBSAs. For FY 2026, Tables 2 and 3 associated with this
proposed rule and the County to CBSA Crosswalk File and Urban CBSAs and
Constituent Counties for Acute Care Hospitals File posted on the CMS
website reflect the latest FIPS county code updates.
B. Worksheet S-3 Wage Data for the FY 2026 Wage Index
1. Cost Reporting Periods Beginning in FY 2022 for FY 2026 Wage Index
The proposed FY 2026 wage index values are based on the data
collected from the Medicare cost reports submitted by hospitals for
cost reporting periods beginning in FY 2022 (the FY 2025 wage indexes
were based on data from cost reporting periods beginning during FY
2021).
The proposed FY 2026 wage index includes all of the following
categories of data associated with costs paid under the IPPS (as well
as outpatient costs):
Salaries and hours from short-term, acute care hospitals
(including paid lunch hours and hours associated with military leave
and jury duty).
Home office costs and hours.
Certain contract labor costs and hours including direct
patient care (which includes nursing), certain top management,
pharmacy, laboratory, and nonteaching physician Part A services, and
certain contract indirect patient care services (as discussed in the FY
2008 final rule with comment period (72 FR 47315 through 47317)).
Wage-related costs, including pension costs (based on
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586
through 51590) and modified in the FY 2016 IPPS/LTCH PPS final rule (80
FR 49505 through 49508)) and other deferred compensation costs.
Consistent with the wage index methodology for FY 2025, the
proposed wage index for FY 2026 excludes the direct and overhead
salaries and hours for services not subject to IPPS payment, such as
skilled nursing facility (SNF) services, home health services, costs
related to Graduate Medical Education (GME) (teaching physicians and
residents) and certified registered nurse anesthetists (CRNAs), and
other subprovider components that are not paid under the IPPS. The
proposed FY 2026 wage index also excludes the salaries, hours, and
wage-related costs of hospital-based rural health clinics (RHCs), and
Federally Qualified Health Centers (FQHCs), because Medicare pays for
these costs outside of the IPPS (68 FR 45395). In addition, as
explained in the FY 2004 IPPS final rule (68 FR 45397 through 45398),
salaries, hours, and wage-related costs of Critical Access Hospitals
(CAHs) are excluded from the wage index as we believe that removing
CAHs from the wage index is prudent policy, given the substantial
negative impact these hospitals have on the wage indexes in the areas
where they are located and the minimal impact they have on the wage
indexes of other areas. We refer the reader to the FY 2004 IPPS final
rule (68 FR 45397 through 45398) for a complete discussion regarding
the exclusion of CAHs from the wage index. Similar to our treatment of
CAHs, as discussed later in this section, we exclude Rural Emergency
Hospitals (REHs) from the wage index.
For FY 2020 and subsequent years, other wage-related costs are also
excluded from the calculation of the wage index. As discussed in the FY
2019 IPPS/LTCH final rule (83 FR 41365 through 41369), other wage-
related costs reported on Worksheet S-3, Part II, Line 18 and Worksheet
S-3, Part IV, Line 25 and subscripts, as well as all other wage-related
costs, such as contract
[[Page 18219]]
labor costs, are excluded from the calculation of the wage index.
2. Use of Wage Index Data by Suppliers and Providers Other Than Acute
Care Hospitals Under the IPPS
Data collected for the IPPS wage index also are currently used to
calculate wage indexes applicable to suppliers and other providers,
such as SNFs, home health agencies (HHAs), ambulatory surgical centers
(ASCs), and hospices. In addition, they are used for prospective
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient
services. We note, in the calendar year (CY) 2025 ESRD PPS final rule
(89 FR 89097-89116), CMS finalized a new ESRD PPS-specific wage index
that will be used to adjust ESRD PPS payments for geographic
differences in area wages. We refer the reader to the CY 2025 ESRD PPS
final rule for complete details regarding ESRD wage index. We further
note that, in the IPPS rules, we do not address comments pertaining to
the wage indexes of any supplier or provider except IPPS providers and
LTCHs. Such comments should be made in response to separate proposed
rules for those suppliers and providers.
3. Verification of Worksheet S-3 Wage Data
The wage data for the proposed FY 2026 wage index were obtained
from Worksheet S-3, Parts II, III and IV of the Medicare cost report,
CMS Form 2552-10 (OMB Control Number 0938-0050 with an expiration date
September 30, 2025) for cost reporting periods beginning on or after
October 1, 2021, and before October 1, 2022. For wage index purposes,
we refer to cost reports beginning on or after October 1, 2021, and
before October 1, 2022, as the ``FY 2022 cost report,'' the ``FY 2022
wage data,'' or the ``FY 2022 data.'' Instructions for completing the
wage index sections of Worksheet S-3 are included in the Provider
Reimbursement Manual (PRM), Part 2 (Pub. 15-2), Chapter 40, Sections
4005.2 through 4005.4. The data file used to construct the FY 2026 wage
index includes FY 2022 data submitted to us as of January 31, 2025. As
in past years, we performed an extensive review of the wage data,
mostly through the use of edits designed to identify aberrant data.
We note, in previous fiscal years, we reviewed and evaluated the
audited wage data, and the impacts of the COVID-19 PHE on such data.
For FY 2026, we have not identified any significant issues with the FY
2022 wage data itself in terms of our audits of this data. As usual,
the data was audited by the Medicare Administrative Contractors (MACs),
and there were no significant issues reported across the data for all
hospitals.
We requested that our Medicare Administrative Contractors (MACs)
revise or verify data elements that resulted in specific edit failures.
For the proposed FY 2026 wage index, we identified and excluded 79
providers with aberrant data that should not be included in the wage
index. If data elements for some of these providers are corrected, we
intend to include data from those providers in the final FY 2026 wage
index. We also adjusted certain aberrant data and included these data
in the wage index. For example, in situations where a hospital did not
have documentable salaries, wages, and hours for housekeeping and
dietary services, we imputed estimates, in accordance with policies
established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49965
through 49967). We instructed MACs to complete their verification of
questionable data elements and to transmit any changes to the wage data
no later than March 21, 2025.
In constructing the proposed FY 2026 wage index, we included the
wage data for facilities that were IPPS hospitals in FY 2022, inclusive
of those facilities that have since terminated their participation in
the program as hospitals, as long as those data did not fail any of our
edits for reasonableness. We believe that including the wage data for
these hospitals is, in general, appropriate to reflect the economic
conditions in the various labor market areas during the relevant past
period and to ensure that the current wage index represents the labor
market area's current wages as compared to the national average of
wages.
As discussed in the FY 2004 IPPS final rule (68 FR 45397 through
45398) and FY 2025 IPPS/LTCH final rule (89 FR 69268), any hospital
that is designated as a CAH or REH by 7 days prior to the publication
of the preliminary wage index public use file (PUF) is excluded from
the calculation of the wage index.
For the proposed FY 2026 wage index, we removed 7 hospitals that
converted to CAH status and 5 hospitals that converted to REH status on
or after January 24, 2024, the cut-off date for CAH and REH exclusion
from the FY 2025 wage index, and through and including January 24,
2025, the cut-off date for CAH and REH exclusion from the FY 2026 wage
index. In summary, we calculated the FY 2026 wage index using the
Worksheet S-3, Parts II and III wage data of 3,027 hospitals.
For the proposed FY 2026 wage index, we allotted the wages and
hours data for a multicampus hospital among the different labor market
areas where its campuses are located using campus full-time equivalent
(FTE) percentages as originally finalized in the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51591). Table 2, which contains the FY 2026 wage
index associated with this proposed rule (available via the internet on
the CMS website), includes separate wage data for the campuses of 29
multicampus hospitals. The following chart lists the multicampus
hospitals by CMS certification number (CCN) and the FTE percentages on
which the wages and hours of each campus were allotted to their
respective labor market areas:
----------------------------------------------------------------------------------------------------------------
CCN of main Full-time Full-time CCN of second sub Full-time
campus of equivalent CCN of sub campus equivalent campus of equivalent
multicampus percentage of of multicampus percentage of sub multicampus percentage of
hospital main campus hospital campus hospital second sub campus
----------------------------------------------------------------------------------------------------------------
050121 0.86 05B121 0.14 ................. .................
070010 0.85 07B010 0.15 ................. .................
070022 0.99 07B022 0.01 ................. .................
100029 0.52 10B029 0.48 ................. .................
140010 0.81 14B010 0.19 ................. .................
220074 0.9 22B074 0.1 ................. .................
310069 0.17 31B069 0.83 ................. .................
330103 0.69 33B103 0.31 ................. .................
330195 0.9 33B195 0.1 ................. .................
330214 0.77 33B214 0.23 ................. .................
330234 0.79 33B234 0.21 ................. .................
340040 0.93 34B040 0.07 ................. .................
340115 0.82 34B115 0.13 34C115 0.05
[[Page 18220]]
360020 0.97 36B020 0.03 ................. .................
390115 0.82 39B115 0.18 ................. .................
390142 0.83 39B142 0.17 ................. .................
390307 0.89 39B307 0.11 ................. .................
420004 0.96 42B004 0.04 ................. .................
450033 0.96 45B033 0.04 ................. .................
450330 0.96 45B330 0.04 ................. .................
460051 0.77 46B051 0.23 ................. .................
510022 0.94 51B022 0.06 ................. .................
520009 0.72 52B009 0.28 ................. .................
520030 0.98 52B030 0.02 ................. .................
520189 0.72 52B189 0.28 ................. .................
670062 0.84 67B062 0.16 ................. .................
670102 0.68 67B102 0.32 ................. .................
670107 0.69 67B107 0.31 ................. .................
670116 0.66 67B116 0.34 ................. .................
----------------------------------------------------------------------------------------------------------------
We note that, in past years, in Table 2, we have placed a ``B'' to
designate the subordinate campus in the fourth position of the hospital
CCN. However, for the FY 2019 IPPS/LTCH PPS proposed and final rules
and subsequent rules, we have moved the ``B'' to the third position of
the CCN. Because all IPPS hospitals have a ``0'' in the third position
of the CCN, we believe that placement of the ``B'' in this third
position, instead of the ``0'' for the subordinate campus, is the most
efficient method of identification and interferes the least with the
other variable digits in the CCN. We also note that provider 340115 has
an additional second sub campus located in a different CBSA then the
main campus and its other sub campus. Therefore, in order to uniquely
identify this second sub campus, we have placed a ``C'' in the third
position of the CCN.
4. Process for Requests for Wage Index Data Corrections
a. Process for Hospitals To Request Wage Index Data Corrections
The preliminary, unaudited Worksheet S-3 wage data files for the
proposed FY 2026 wage index were made available on May 23, 2024,
through the internet on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page. The FY 2026 preliminary
Worksheet S-3 wage data file inadvertently contained cost report data
with a begin date before 10/01/2021 and cost report data with a begin
date after 10/01/2022. We removed these cost reports and added cost
reports that were inadvertently omitted from the file originally posted
on May 23. Therefore, on June 20, 2024, we posted an updated FY 2026
preliminary Worksheet S-3 wage data file.
On January 31, 2025, we posted a public use file (PUF) at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page containing
FY 2026 wage index data available as of January 31, 2025. This PUF
contains a tab with the Worksheet S-3 wage data (which includes
Worksheet S-3, Parts II and III wage data from cost reporting periods
beginning on or after October 1, 2021, through September 30, 2022; that
is, FY 2022 wage data), a tab with the occupational mix data (which
includes data from the CY 2022 occupational mix survey, Form CMS-
10079), a tab containing the Worksheet S-3 wage data of hospitals
deleted from the January 31, 2025 wage data PUF, and a tab containing
the CY 2022 occupational mix data of the hospitals deleted from the
January 31, 2025 occupational mix PUF. In a memorandum dated January
31, 2025, we instructed all MACs to inform the IPPS hospitals that they
service of the availability of the January 31, 2025, wage index data
PUFs, and the process and timeframe for requesting revisions in
accordance with the FY 2026 Hospital Wage Index Development Time Table
available at https://www.cms.gov/files/document/fy-2026-hospital-wage-index-development-time-table.pdf.
In the interest of meeting the data needs of the public, beginning
with the proposed FY 2009 wage index, we post an additional PUF on the
CMS website that reflects the actual data that are used in computing
the proposed wage index. The release of this file does not alter the
current wage index process or schedule. We notify the hospital
community of the availability of these data as we do with the current
public use wage data files through our Hospital Open Door Forum. We
encourage hospitals to sign up for automatic notifications of
information about hospital issues and about the dates of the Hospital
Open Door Forums at the CMS website at https://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums.
In a memorandum dated April 17, 2024, we instructed all MACs to
inform the IPPS hospitals that they service of the availability of the
preliminary wage index data files and the CY 2022 occupational mix
survey data files posted on May 23, 2024, and the process and timeframe
for requesting revisions.
If a hospital wished to request a change to its data as shown in
the May 23, 2024, preliminary wage data files and occupational mix data
files, the hospital had to submit corrections along with complete,
detailed supporting documentation to its MAC so that the MAC received
them by September 3, 2024. Hospitals were notified of these deadlines
and of all other deadlines and requirements, including the requirement
to review and verify their data as posted in the preliminary wage index
data files on the internet, through the letters sent to them by their
MACs.
November 1, 2024, was the date by when MACs notified State hospital
associations regarding hospitals that failed to respond to issues
raised during the desk reviews. Additional revisions made by the MACs
were transmitted to CMS throughout January 2025. CMS published the wage
index PUFs that included hospitals' revised wage index data on January
31, 2025. Hospitals had until February 18, 2025, to submit requests to
the MACs to correct errors in the January 31, 2025, PUF due to CMS or
MAC mishandling of the wage index data, or to revise desk review
adjustments to their wage index data as included in the January 31,
2025, PUF.
[[Page 18221]]
Hospitals also were required to submit sufficient documentation to
support their requests. Hospitals' requests and supporting
documentation must have been received by the MAC by the February
deadline (that is, by February 18, 2025, for the FY 2026 wage index).
After reviewing requested changes submitted by hospitals, MACs were
required to transmit to CMS any additional revisions resulting from the
hospitals' reconsideration requests by March 21, 2025. Under our
current policy as adopted in the FY 2018 IPPS/LTCH PPS final rule (82
FR 38153), the deadline for a hospital to request CMS intervention in
cases where a hospital disagreed with a MAC's handling of wage data on
any basis (including a policy, factual, or other dispute) is April 4,
2025. Data that were incorrect in the preliminary or January 31, 2025,
wage index data PUFs, but for which no correction request was received
by the February 18, 2025, deadline, are not considered for correction
at this stage. In addition, April 4, 2025, is the deadline for
hospitals to dispute data corrections made by CMS of which the hospital
was notified after the January 31, 2025, PUF and at least 14 calendar
days prior to April 4, 2025 (that is, March 21, 2025), that do not
arise from a hospital's request for revisions. The hospital's request
and supporting documentation must be received by CMS (and a copy
received by the MAC) by the April deadline (that is, by April 4, 2025,
for the FY 2026 wage index). We refer readers to the FY 2026 Hospital
Wage Index Development Time Table for complete details.
Hospitals are given the opportunity to examine Table 2 associated
with this proposed rule, which is listed in section VI. of the Addendum
to the proposed rule and available via the internet on the CMS website
at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page.
Table 2 associated with the proposed rule contains each hospital's
proposed adjusted average hourly wage used to construct the wage index
values for the past 3 years, including the proposed FY 2026 wage index,
which was constructed from FY 2022 data. We note that the proposed
hospital average hourly wages shown in Table 2 only reflect changes
made to a hospital's data that were transmitted to CMS by late January
2025.
We plan to post the final wage index data PUFs on April 30, 2025,
on the CMS website at https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/wage-index-files/fy-2026-wage-index-home-page. The April 2025 PUFs are made available solely for the
limited purpose of identifying any potential errors made by CMS or the
MAC in the entry of the final wage index data that resulted from the
correction process (the process for disputing revisions submitted to
CMS by the MACs by March 21, 2025, and the process for disputing data
corrections made by CMS that did not arise from a hospital's request
for wage data revisions as discussed earlier), as previously described.
After the release of the April 2025 wage index data PUFs, changes
to the wage and occupational mix data can only be made in those very
limited situations involving an error by the MAC or CMS that the
hospital could not have known about before its review of the final wage
index data files. Specifically, neither the MAC nor CMS will approve
the following types of requests:
Requests for wage index data corrections that were
submitted too late to be included in the data transmitted to CMS by the
MACs on or before March 21, 2025.
Requests for correction of errors that were not, but could
have been, identified during the hospital's review of the January 31,
2025, wage index PUFs.
Requests to revisit factual determinations or policy
interpretations made by the MAC or CMS during the wage index data
correction process.
If, after reviewing the April 2025 final wage index data PUFs, a
hospital believes that its wage or occupational mix data are incorrect
due to a MAC or CMS error in the entry or tabulation of the final data,
the hospital is given the opportunity to notify both its MAC and CMS
regarding why the hospital believes an error exists and provide all
supporting information, including relevant dates (for example, when it
first became aware of the error). The hospital is required to send its
request to CMS and to the MAC so that it is received no later than May
30, 2025. May 30, 2025, is also the deadline for hospitals to dispute
data corrections made by CMS of which the hospital is notified on or
after 13 calendar days prior to April 4, 2025 (that is, March 22,
2025), and at least 14 calendar days prior to May 30, 2025 (that is,
May 16, 2025), that did not arise from a hospital's request for
revisions. (Data corrections made by CMS of which a hospital is
notified on or after 13 calendar days prior to May 30, 2025 (that is,
May 17, 2025), may be appealed to the Provider Reimbursement Review
Board (PRRB)). In accordance with the FY 2026 Hospital Wage Index
Development Time Table posted on the CMS website at https://www.cms.gov/files/document/fy-2026-hospital-wage-index-development-time-table.pdf, the May appeals are required to be submitted to CMS
through an online submission process or through email. We refer readers
to the FY 2026 Hospital Wage Index Development Time Table for complete
details.
Verified corrections to the wage index data received timely (that
is, by May 30, 2025) by CMS and the MACs will be incorporated into the
final FY 2026 wage index, which will be effective October 1, 2025.
We created the processes previously described to resolve all
substantive wage index data correction disputes before we finalize the
wage and occupational mix data for the FY 2026 payment rates.
Accordingly, hospitals that do not meet the procedural deadlines set
forth earlier will not be afforded a later opportunity to submit wage
index data corrections or to dispute the MAC's decision with respect to
requested changes. Specifically, our policy is that hospitals that do
not meet the procedural deadlines as previously set forth (requiring
requests to MACs by the specified date in February and, where such
requests are unsuccessful, requests for intervention by CMS by the
specified date in April) will not be permitted to challenge later,
before the PRRB, the failure of CMS to make a requested data revision.
We refer readers also to the FY 2000 IPPS final rule (64 FR 41513) for
a discussion of the parameters for appeals to the PRRB for wage index
data corrections. As finalized in the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38154 through 38156), this policy also applies to a hospital
disputing corrections made by CMS that do not arise from a hospital's
request for a wage index data revision. That is, a hospital disputing
an adjustment made by CMS that did not arise from a hospital's request
for a wage index data revision is required to request a correction by
the first applicable deadline. Hospitals that do not meet the
procedural deadlines set forth earlier will not be afforded a later
opportunity to submit wage index data corrections or to dispute CMS'
decision with respect to changes.
Again, we believe the wage index data correction process described
earlier provides hospitals with sufficient opportunity to bring errors
in their wage and occupational mix data to the MAC's attention.
Moreover, because hospitals had access to the final wage index data
PUFs by late April 2025, they have an opportunity to detect any data
entry or
[[Page 18222]]
tabulation errors made by the MAC or CMS before the development and
publication of the final FY 2026 wage index by August 2025, and the
implementation of the FY 2026 wage index on October 1, 2025. Given
these processes, the wage index implemented on October 1 should be
accurate. Nevertheless, in the event that errors are identified by
hospitals and brought to our attention after May 30, 2025, we retain
the right to make midyear changes to the wage index under very limited
circumstances.
Specifically, in accordance with Sec. 412.64(k)(1) of our
regulations, we make midyear corrections to the wage index for an area
only if a hospital can show that: (1) The MAC or CMS made an error in
tabulating its data; and (2) the requesting hospital could not have
known about the error or did not have an opportunity to correct the
error, before the beginning of the fiscal year. For purposes of this
provision, ``before the beginning of the fiscal year'' means by the May
deadline for making corrections to the wage data for the following
fiscal year's wage index (for example, May 30, 2025, for the FY 2026
wage index). This provision is not available to a hospital seeking to
revise another hospital's data that may be affecting the requesting
hospital's wage index for the labor market area. As indicated earlier,
because CMS makes the wage index data available to hospitals on the CMS
website prior to publishing both the proposed and final IPPS rules, and
the MACs notify hospitals directly of any wage index data changes after
completing their desk reviews, we do not expect that midyear
corrections will be necessary. However, under our current policy, if
the correction of a data error changes the wage index value for an
area, the revised wage index value will be effective prospectively from
the date the correction is made.
In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and
47485), we revised Sec. 412.64(k)(2) to specify that, effective on
October 1, 2005, that is, beginning with the FY 2006 wage index, a
change to the wage index can be made retroactive to the beginning of
the Federal fiscal year only when CMS determines all of the following:
(1) The MAC or CMS made an error in tabulating data used for the wage
index calculation; (2) the hospital knew about the error and requested
that the MAC and CMS correct the error using the established process
and within the established schedule for requesting corrections to the
wage index data, before the beginning of the fiscal year for the
applicable IPPS update (that is, by the May 30, 2025, deadline for the
FY 2026 wage index); and (3) CMS agreed before October 1 that the MAC
or CMS made an error in tabulating the hospital's wage index data and
the wage index should be corrected.
In those circumstances where a hospital requested a correction to
its wage index data before CMS calculated the final wage index (that
is, by the May 30, 2025 deadline for the FY 2026 wage index), and CMS
acknowledges that the error in the hospital's wage index data was
caused by CMS' or the MAC's mishandling of the data, we believe that
the hospital should not be penalized by our delay in publishing or
implementing the correction. As with our current policy, we indicated
that the provision is not available to a hospital seeking to revise
another hospital's data. In addition, the provision cannot be used to
correct prior years' wage index data; it can only be used for the
current Federal fiscal year. In situations where our policies would
allow midyear corrections other than those specified in Sec.
412.64(k)(2)(ii), we continue to believe that it is appropriate to make
prospective-only corrections to the wage index.
We note that, as with prospective changes to the wage index, the
final retroactive correction will be made irrespective of whether the
change increases or decreases a hospital's payment rate. In addition,
we note that the policy of retroactive adjustment will still apply in
those instances where a final judicial decision reverses a CMS denial
of a hospital's wage index data revision request.
b. Process for Data Corrections by CMS After the January 31, 2025,
Public Use File (PUF)
The process set forth with the wage index timetable discussed in
section III.C.4. of the preamble of this proposed rule allows hospitals
to request corrections to their wage index data within prescribed
timeframes. In addition to hospitals' opportunity to request
corrections of wage index data errors or MACs' mishandling of data, CMS
has the authority under section 1886(d)(3)(E) of the Act to make
corrections to hospital wage index and occupational mix data to ensure
the accuracy of the wage index. As we explained in the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49490 through 49491) and the FY 2017 IPPS/
LTCH PPS final rule (81 FR 56914), section 1886(d)(3)(E) of the Act
requires the Secretary to adjust the proportion of hospitals' costs
attributable to wages and wage-related costs for area differences
reflecting the relative hospital wage level in the geographic areas of
the hospital compared to the national average hospital wage level. We
believe that, under section 1886(d)(3)(E) of the Act, we have
discretion to make corrections to hospitals' data to help ensure that
the costs attributable to wages and wage-related costs in fact
accurately reflect the relative hospital wage level in the hospitals'
geographic areas.
We have an established multistep, 15-month process for the review
and correction of the hospital wage data that is used to create the
IPPS wage index for the upcoming fiscal year. Since the origin of the
IPPS, the wage index has been subject to its own annual review process,
first by the MACs, and then by CMS. As a standard practice, after each
annual desk review, CMS reviews the results of the MACs' desk reviews
and focuses on items flagged during the desk review, requiring that, if
necessary, hospitals provide additional documentation, adjustments, or
corrections to the data. This ongoing communication with hospitals
about their wage data may result in the discovery by CMS of additional
items that were reported incorrectly or other data errors, even after
the posting of the January 31, 2025, PUF, and throughout the remainder
of the wage index development process. In addition, the fact that CMS
analyzes the data from a regional and even national level, unlike the
review performed by the MACs that review a limited subset of hospitals,
can facilitate additional editing of the data the need for which may
not be readily apparent to the MACs. In these occasional instances, an
error may be of sufficient magnitude that the wage index of an entire
CBSA is affected. Accordingly, CMS uses its authority to ensure that
the wage index accurately reflects the relative hospital wage level in
the geographic area of the hospital compared to the national average
hospital wage level, by continuing to make corrections to hospital wage
data upon discovering incorrect wage data, distinct from instances in
which hospitals request data revisions.
We note that CMS corrects errors to hospital wage data as
appropriate, regardless of whether that correction will raise or lower
a hospital's average hourly wage. For example, as discussed in section
III.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule (83 FR
41364), in situations where a hospital did not have documentable
salaries, wages, and hours for housekeeping and dietary services, we
imputed estimates, in accordance with policies established in the FY
2015 IPPS/LTCH PPS final rule (79 FR 49965
[[Page 18223]]
through 49967). Furthermore, if CMS discovers after conclusion of the
desk review, for example, that a MAC inadvertently failed to
incorporate positive adjustments resulting from a prior year's wage
index appeal of a hospital's wage-related costs such as pension, CMS
would correct that data error, and the hospital's average hourly wage
would likely increase as a result.
While we maintain CMS' authority to conduct additional review and
make resulting corrections at any time during the wage index
development process, in accordance with the policy finalized in the FY
2018 IPPS/LTCH PPS final rule (82 FR 38154 through 38156) and as first
implemented with the FY 2019 wage index (83 FR 41389), hospitals are
able to request further review of a correction made by CMS that did not
arise from a hospital's request for a wage index data correction.
Instances where CMS makes a correction to a hospital's data after the
January 31, 2025, PUF based on a different understanding than the
hospital about certain reported costs, for example, could potentially
be resolved using this process before the final wage index is
calculated. We believe this process and the timeline for requesting
review of such corrections (as described earlier and in the FY 2018
IPPS/LTCH PPS final rule) promote additional transparency in instances
where CMS makes data corrections after the January 31, 2025 PUF and
provide opportunities for hospitals to request further review of CMS
changes in time for the most accurate data to be reflected in the final
wage index calculations. These additional appeals opportunities are
described earlier and in the FY 2026 Hospital Wage Index Development
Time Table, as well as in the FY 2018 IPPS/LTCH PPS final rule (82 FR
38154 through 38156).
C. Method for Computing the Proposed FY 2026 Unadjusted Wage Index
The method used to compute the proposed FY 2026 wage index without
an occupational mix adjustment follows the same methodology that we
used to compute the wage indexes without an occupational mix adjustment
in the FY 2021 IPPS/LTCH PPS final rule (see 85 FR 58758 through
58761), and we are not proposing any changes to this methodology. We
have restated our methodology in this section the preamble of this
proposed rule.
Step 1.--We gathered data from each of the non-Federal, short-term,
acute care hospitals for which data were reported on the Worksheet S-3,
Parts II and III of the Medicare cost report for the hospital's cost
reporting period relevant to the wage index (in this case, for FY 2026,
these were data from cost reports for cost reporting periods beginning
on or after October 1, 2021, and before October 1, 2022). In addition,
we included data from hospitals that had cost reporting periods
beginning prior to the October 1, 2021, begin date and extending into
FY 2022 but that did not have any cost report with a begin date on or
after October 1, 2021, and before October 1, 2022. We include this data
because no other data from these hospitals would be available for the
cost reporting period as previously described, and because particular
labor market areas might be affected due to the omission of these
hospitals. However, we generally describe these wage data as data
applicable to the fiscal year wage data being used to compute the wage
index for those hospitals. We note that, if a hospital had more than
one cost reporting period beginning during FY 2022 (for example, a
hospital had two short cost reporting periods beginning on or after
October 1, 2021, and before October 1, 2022), we include wage data from
only one of the cost reporting periods, the longer, in the wage index
calculation. If there was more than one cost reporting period and the
periods were equal in length, we included the wage data from the later
period in the wage index calculation.
Step 2.--Salaries.--The method used to compute a hospital's average
hourly wage excludes certain costs that are not paid under the IPPS.
(We note that, beginning with FY 2008 (72 FR 47315), we included what
were then Lines 22.01, 26.01, and 27.01 of Worksheet S-3, Part II of
CMS Form 2552-96 for overhead services in the wage index. Currently,
these lines are lines 28, 33, and 35 on CMS Form 2552-10. However, we
note that the wages and hours on these lines are not incorporated into
Line 101, Column 1 of Worksheet A, which, through the electronic cost
reporting software, flows directly to Line 1 of Worksheet S-3, Part II.
Therefore, the first step in the wage index calculation is to compute a
``revised'' Line 1, by adding to the Line 1 on Worksheet S-3, Part II
(for wages and hours respectively) the amounts on Lines 28, 33, and
35.) In calculating a hospital's Net Salaries (we note that we
previously used the term ``average'' salaries in the FY 2012 IPPS/LTCH
PPS final rule (76 FR 51592), but we now use the term ``net'' salaries)
plus wage-related costs, we first compute the following: Subtract from
Line 1 (total salaries) the GME and CRNA costs reported on CMS Form
2552-10, Lines 2, 4.01, 7, and 7.01, the Part B salaries reported on
Lines 3, 5 and 6, home office salaries reported on Line 8, and exclude
salaries reported on Lines 9 and 10 (that is, direct salaries
attributable to SNF services, home health services, and other
subprovider components not subject to the IPPS). We also subtract from
Line 1 the salaries for which no hours were reported. Therefore, the
formula for Net Salaries (from Worksheet S-3, Part II) is the
following:
((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line
4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line
10)).
To determine Total Salaries plus Wage-Related Costs, we add to the
Net Salaries the costs of contract labor for direct patient care,
certain top management, pharmacy, laboratory, and nonteaching physician
Part A services (Lines 11, 12 and 13), home office salaries and wage-
related costs reported by the hospital on Lines 14.01, 14.02, and 15,
and nonexcluded area wage-related costs (Lines 17, 22, 25.50, 25.51,
and 25.52). We note that contract labor and home office salaries for
which no corresponding hours are reported are not included. In
addition, wage-related costs for nonteaching physician Part A employees
(Line 22) are excluded if no corresponding salaries are reported for
those employees on Line 4. The formula for Total Salaries plus Wage-
Related Costs (from Worksheet S-3, Part II) is the following: ((Line 1
+ Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line 4.01 + Line 5 +
Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line 10)) + (Line 11 +
Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15) + (Line 17 + Line 22
+ 25.50 + 25.51 + 25.52).
Step 3.--Hours.--With the exception of wage-related costs, for
which there are no associated hours, we compute total hours using the
same methods as described for salaries in Step 2. The formula for Total
Hours (from Worksheet S-3, Part II) is the following:
((Line 1 + Line 28 + Line 33 + Line 35)-(Line 2 + Line 3 + Line
4.01 + Line 5 + Line 6 + Line 7 + Line 7.01 + Line 8 + Line 9 + Line
10)) + (Line 11 + Line 12 + Line 13 + Line 14.01 + 14.02 + Line 15).
Step 4.--For each hospital reporting both total overhead salaries
and total overhead hours greater than zero, we then allocate overhead
costs to areas of the hospital excluded from the wage index
calculation. First, we determine the ``excluded rate'', which is the
ratio of excluded area hours to Revised Total Hours (from Worksheet S-
3, Part II) with the following formula: (Line 9 + Line 10)/(Line 1 +
Line 28 + Line 33 + Line 35)-(Lines 2, 3, 4.01, 5, 6, 7, 7.01, and 8
and Lines 26 through 43). We then compute the amounts of overhead
[[Page 18224]]
salaries and hours to be allocated to the excluded areas by multiplying
the previously discussed ratio by the total overhead salaries and hours
reported on Lines 26 through 43 of Worksheet S-3, Part II. Next, we
compute the amounts of overhead wage-related costs to be allocated to
the excluded areas using three steps:
We determine the ``overhead rate'' (from Worksheet S-3,
Part II), which is the ratio of overhead hours (Lines 26 through 43
minus the sum of Lines 28, 33, and 35) to revised hours excluding the
sum of lines 28, 33, and 35 (Line 1 minus the sum of Lines 2, 3, 4.01,
5, 6, 7, 7.01, 8, 9, 10, 28, 33, and 35). We note that, for the FY 2008
and subsequent wage index calculations, we have been excluding the
overhead contract labor (Lines 28, 33, and 35) from the determination
of the ratio of overhead hours to revised hours because hospitals
typically do not provide fringe benefits (wage-related costs) to
contract personnel. Therefore, it is not necessary for the wage index
calculation to exclude overhead wage-related costs for contract
personnel. Further, if a hospital does contribute to wage-related costs
for contracted personnel, the instructions for Lines 28, 33, and 35
require that associated wage-related costs be combined with wages on
the respective contract labor lines. The formula for the Overhead Rate
(from Worksheet S-3, Part II) is the following: (Lines 26 through 43-
Lines 28, 33 and 35)/((((Line 1 + Lines 28, 33, 35)-(Lines 2, 3, 4.01,
5, 6, 7, 7.01, 8, and 26 through 43))-(Lines 9 and 10)) + (Lines 26
through 43-Lines 28, 33, and 35)).
We compute overhead wage-related costs by multiplying the
overhead hours ratio by wage-related costs reported on Part II, Lines
17, 22, 25.50, 25.51, and 25.52.
We multiply the computed overhead wage-related costs by
the previously described excluded area hours ratio.
Finally, we subtract the computed overhead salaries, wage-related
costs, and hours associated with excluded areas from the total salaries
(plus wage-related costs) and hours derived in Steps 2 and 3.
Step 5.--For each hospital, we adjust the total salaries plus wage-
related costs to a common period to determine total adjusted salaries
plus wage-related costs. To make the wage adjustment, we estimate the
percentage change in the employment cost index (ECI) for compensation
for each 30-day increment from October 14, 2021, through April 15,
2023, for private industry hospital workers from data obtained from the
Bureau of Labor Statistics' (BLS') Office of Compensation and Working
Conditions. We use the ECI because it reflects the price increase
associated with total compensation (salaries plus fringe benefits)
rather than just the increase in salaries. In addition, the ECI
includes managers as well as other hospital workers. This methodology
to compute the monthly update factors uses actual quarterly ECI data
and assures that the update factors match the actual quarterly and
annual percent changes. We also note that, since April 2006 with the
publication of March 2006 data, the BLS' ECI uses a different
classification system, the North American Industrial Classification
System (NAICS), instead of the Standard Industrial Codes (SICs), which
no longer exist. We have consistently used the ECI as the data source
for our wages and salaries and other price proxies in the IPPS market
basket, and we are not proposing to make any changes to the usage of
the ECI for FY 2026. The factors used to adjust the hospital's data are
based on the midpoint of the cost reporting period, as indicated in
this proposed rule.
Step 6.--Each hospital is assigned to its appropriate urban or
rural labor market area before any reclassifications under section
1886(d)(8)(B), 1886(d)(8)(E), or 1886(d)(10) of the Act. Within each
urban or rural labor market area, we add the total adjusted salaries
plus wage-related costs obtained in Step 5 for all hospitals in that
area to determine the total adjusted salaries plus wage-related costs
for the labor market area.
Step 7.--We divide the total adjusted salaries plus wage-related
costs obtained under Step 6 by the sum of the corresponding total hours
(from Step 4) for all hospitals in each labor market area to determine
an average hourly wage for the area.
Step 8.--We add the total adjusted salaries plus wage-related costs
obtained in Step 5 for all hospitals in the Nation and then divide the
sum by the national sum of total hours from Step 4 to arrive at a
national average hourly wage.
Step 9.--For each urban or rural labor market area, we calculate
the hospital wage index value, unadjusted for occupational mix, by
dividing the area average hourly wage obtained in Step 7 by the
national average hourly wage computed in Step 8.
Step 10.--For each urban labor market area for which we do not have
any hospital wage data (either because there are no IPPS hospitals in
that labor market area, or there are IPPS hospitals in that area but
their data are either too new to be reflected in the current year's
wage index calculation, or their data are aberrant and are deleted from
the wage index), we finalized in the FY 2020 IPPS/LTCH PPS final rule
(84 FR 42305) that, for FY 2020 and subsequent years' wage index
calculations, such CBSAs' wage index would be equal to total urban
salaries plus wage-related costs (from Step 5) in the State, divided by
the total urban hours (from Step 4) in the State, divided by the
national average hourly wage from Step 8 (see 84 FR 42305 and 42306).
We believe that, in the absence of wage data for an urban labor market
area, it is reasonable to use a statewide urban average, which is based
on actual, acceptable wage data of hospitals in that State, rather than
impute some other type of value using a different methodology. For
calculation of the proposed FY 2026 wage index, we note there is one
urban CBSA for which we do not have IPPS hospital wage data. In Table 3
(which is available via the internet on the CMS website and contains
the area wage indexes), we include a footnote to indicate to which CBSA
this policy applies. This CBSA's wage index is calculated as described,
based on the FY 2020 IPPS/LTCH PPS final rule methodology (84 FR
42305). Under this step, we also apply our policy with regard to how
dollar amounts, hours, and other numerical values in the wage index
calculations are rounded.
We refer readers to section II. of Appendix B of this proposed rule
for the policy regarding rural areas that do not have IPPS hospitals.
Step 11.--Section 4410 of Public Law 105-33 provides that, for
discharges on or after October 1, 1997, the area wage index applicable
to any hospital that is located in an urban area of a State may not be
less than the area wage index applicable to hospitals located in rural
areas in that State. The areas affected by this provision are
identified in Table 2 listed in section VI. of the Addendum to the
proposed rule and available via the internet on the CMS website.
The following is our policy with regard to rounding of the wage
data (dollar amounts, hours, and other numerical values) in the
calculation of the unadjusted and adjusted wage index, as finalized in
the FY 2020 IPPS/LTCH final rule (84 FR 42306). For data that we
consider to be ``raw data,'' such as the cost report data on Worksheets
S-3, Parts II and III, and the occupational mix survey data, we use
such data ``as is,'' and do not round any of the individual line items
or fields. However, for any dollar amounts within the wage index
calculations, including any type of summed wage amount, average hourly
wages, and the national average hourly wage (both the unadjusted and
[[Page 18225]]
adjusted for occupational mix), we round the dollar amounts to 2
decimals. For any hour amounts within the wage index calculations, we
round such hour amounts to the nearest whole number. For any numbers
not expressed as dollars or hours within the wage index calculations,
which could include ratios, percentages, or inflation factors, we round
such numbers to 5 decimals. However, we continue rounding the actual
unadjusted and adjusted wage indexes to 4 decimals, as we have done
historically.
As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step
5,'' for each hospital, we adjust the total salaries plus wage-related
costs to a common period to determine total adjusted salaries plus
wage-related costs. To make the wage adjustment, we estimate the
percentage change in the ECI for compensation for each 30-day increment
from October 14, 2021, through April 15, 2023, for private industry
hospital workers from the BLS' Office of Compensation and Working
Conditions data. We have consistently used the ECI as the data source
for our wages and salaries and other price proxies in the IPPS market
basket, and we are not proposing any changes to the usage of the ECI
for FY 2026. The factors used to adjust the hospital's data were based
on the midpoint of the cost reporting period, as indicated in the
following table.
Midpoint of Cost Reporting Period
------------------------------------------------------------------------
After Before Adjustment factor
------------------------------------------------------------------------
10/14/2021 11/15/2021 1.07227
11/14/2021 12/15/2021 1.06742
12/14/2021 01/15/2022 1.06250
01/14/2022 02/15/2022 1.05755
02/14/2022 03/15/2022 1.05259
03/14/2022 04/15/2022 1.04772
04/14/2022 05/15/2022 1.04303
05/14/2022 06/15/2022 1.03854
06/14/2022 07/15/2022 1.03412
07/14/2022 08/15/2022 1.02967
08/14/2022 09/15/2022 1.02518
09/14/2022 10/15/2022 1.02072
10/14/2022 11/15/2022 1.01637
11/14/2022 12/15/2022 1.01212
12/14/2022 01/15/2023 1.00797
01/14/2023 02/15/2023 1.00393
02/14/2023 03/15/2023 1.00000
03/14/2023 04/15/2023 0.99617
------------------------------------------------------------------------
For example, the midpoint of a cost reporting period beginning
January 1, 2022, and ending December 31, 2022, is June 30, 2022. An
adjustment factor of 1.03412 was applied to the wages of a hospital
with such a cost reporting period.
Previously, we also would provide a Puerto Rico overall average
hourly wage. As discussed in the FY 2017 IPPS/LTCH PPS final rule (81
FR 56915), prior to January 1, 2016, Puerto Rico hospitals were paid
based on 75 percent of the national standardized amount and 25 percent
of the Puerto Rico-specific standardized amount. As a result, we
calculated a Puerto Rico specific wage index that was applied to the
labor-related share of the Puerto Rico-specific standardized amount.
Section 601 of Division O, Title VI (section 601) of the Consolidated
Appropriations Act, 2016 (Pub. L. 114-113) amended section
1886(d)(9)(E) of the Act to specify that the payment calculation with
respect to operating costs of inpatient hospital services of a
subsection (d) Puerto Rico hospital for inpatient hospital discharges
on or after January 1, 2016, shall use 100 percent of the national
standardized amount. As we stated in the FY 2017 IPPS/LTCH PPS final
rule (81 FR 56915 through 56916), because Puerto Rico hospitals are no
longer paid with a Puerto Rico specific standardized amount as of
January 1, 2016, under section 1886(d)(9)(E) of the Act, as amended by
section 601 of the Consolidated Appropriations Act, 2016, there is no
longer a need to calculate a Puerto Rico specific average hourly wage
and wage index. Hospitals in Puerto Rico are now paid 100 percent of
the national standardized amount and, therefore, are subject to the
national average hourly wage (unadjusted for occupational mix) and the
national wage index, which is applied to the national labor-related
share of the national standardized amount. Therefore, for FY 2026,
there is no Puerto Rico-specific overall average hourly wage or wage
index.
Based on the previously described methodology, the proposed FY 2026
unadjusted national average hourly wage is the following:
Proposed FY 2026 Unadjusted National Average Hourly Wage: $57.70
D. Proposed Occupational Mix Adjustment to the FY 2026 Wage Index
As stated earlier, section 1886(d)(3)(E) of the Act provides for
the collection of data every 3 years on the occupational mix of
employees for each short-term, acute care hospital participating in the
Medicare program, to construct an occupational mix adjustment to the
wage index, for application beginning October 1, 2004 (the FY 2005 wage
index). The purpose of the occupational mix adjustment is to control
for the effect of hospitals' employment choices on the wage index. For
example, hospitals may choose to employ different combinations of
registered nurses, licensed practical nurses, nursing aides, and
medical assistants for the purpose of providing nursing care to their
patients. The varying labor costs associated with these choices reflect
hospital management decisions rather than geographic differences in the
costs of labor.
1. Use of 2022 Medicare Wage Index Occupational Mix Survey for the FY
2026 Wage Index
Section 304(c) of Appendix F, Title III of the Consolidated
Appropriations Act, 2001 (Pub. L. 106-554) amended section
1886(d)(3)(E) of the Act to require CMS to collect data every 3 years
on the occupational mix of employees for each short-term, acute care
hospital participating in the Medicare program and to measure the
earnings and paid hours of employment for such hospitals by
occupational category. As discussed in the FY 2025 IPPS/LTCH PPS final
rule (89 FR 69275 through 69278), we collected data in 2022 to compute
the occupational mix adjustment for the FY 2025, FY 2026, and FY 2027
wage indexes.
The FY 2026 occupational mix adjustment is based on a calendar year
(CY) 2022 survey. Hospitals were required to submit their completed
2022 surveys (Form CMS-10079, OMB Control Number 0938-0907, expiration
date January 31, 2026) to their MACs by July 1, 2023. The preliminary,
unaudited CY 2022 survey data were posted on the CMS website on July
12, 2023. As with the Worksheet S-3, Parts II and III cost report wage
data, as part of the FY 2026 desk review process, the MACs revised or
verified data elements in hospitals' occupational mix surveys that
resulted in certain edit failures.
2. Calculation of the Occupational Mix Adjustment for FY 2026
For FY 2026, we are proposing to calculate the occupational mix
adjustment factor using the same methodology that we have used since
the FY 2012 wage index (76 FR 51582 through 51586) and to apply the
occupational mix adjustment to 100 percent of the FY 2026 wage index.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308), we modified our
methodology with regard to how dollar amounts, hours, and other
numerical values in the unadjusted and adjusted wage index calculation
are rounded, to ensure consistency in the calculation. According to the
policy finalized in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42308
and 42309), for data that we consider to be ``raw data,'' such as the
[[Page 18226]]
cost report data on Worksheets S-3, Parts II and III, and the
occupational mix survey data, we continue to use these data ``as is'',
and not round any of the individual line items or fields. However, for
any dollar amounts within the wage index calculations, including any
type of summed wage amount, average hourly wages, and the national
average hourly wage (both the unadjusted and adjusted for occupational
mix), we round such dollar amounts to 2 decimals. We round any hour
amounts within the wage index calculations to the nearest whole number.
We round any numbers not expressed as dollars or hours in the wage
index calculations, which could include ratios, percentages, or
inflation factors, to 5 decimals. However, we continue rounding the
actual unadjusted and adjusted wage indexes to 4 decimals, as we have
done historically.
Similar to the method we use for the calculation of the wage index
without occupational mix, salaries and hours for a multicampus hospital
are allotted among the different labor market areas where its campuses
are located. Table 2 associated with this proposed rule (which is
available via the internet on the CMS website), which contains the
proposed FY 2026 occupational mix adjusted wage index, includes
separate wage data for the campuses of multicampus hospitals. We refer
readers to section III.C. of the preamble of this proposed rule for a
chart listing the multicampus hospitals and the FTE percentages used to
allot their occupational mix data.
Because the statute requires that the Secretary measure the
earnings and paid hours of employment by occupational category not less
than once every 3 years, all hospitals that are subject to payments
under the IPPS, or any hospital that would be subject to the IPPS if
not granted a waiver, must complete the occupational mix survey, unless
the hospital has no associated cost report wage data that are included
in the proposed FY 2026 wage index. For the proposed FY 2026 wage
index, we used the Worksheet S-3, Parts II and III wage data of 3,029
hospitals, and we used the occupational mix surveys of 2,945 hospitals
for which we also had Worksheet S-3 wage data, which represented a
``response'' rate of 97 percent (2,945/3,029). For the proposed FY 2026
wage index, we applied proxy data for noncompliant hospitals, new
hospitals, or hospitals that submitted erroneous or aberrant data in
the same manner that we applied proxy data for such hospitals in the FY
2012 wage index occupational mix adjustment (76 FR 51586). As a result
of applying this methodology, the proposed FY 2026 occupational mix
adjusted national average hourly wage is the following:
Proposed FY 2026 Occupational Mix Adjusted National Average Hourly
Wage: $57.63
3. Proposed Occupational Mix Adjustment and the Proposed FY 2026
Occupational Mix Adjusted Wage Index
As discussed in section III.E. of the preamble of this proposed
rule, for FY 2026, we are applying the occupational mix adjustment to
100 percent of the FY 2026 wage index. We calculated the occupational
mix adjustment using data from the 2022 occupational mix survey, using
the methodology described in the FY 2012 IPPS/LTCH PPS final rule (76
FR 51582-51586).
Based on the 2022 occupational mix survey data, the proposed FY
2026 national average hourly wages for each occupational mix nursing
subcategory as calculated in Step 2 of the occupational mix calculation
are as follows:
------------------------------------------------------------------------
Average
Occupational mix nursing subcategory hourly
wage
------------------------------------------------------------------------
National RN.................................................. $60.47
National LPN and Surgical Technician......................... 35.06
National Nurse Aide, Orderly, and Attendant.................. 23.53
National Medical Assistant................................... 23.15
National Nurse Category...................................... 50.12
------------------------------------------------------------------------
The proposed national average hourly wage for the entire nurse
category is computed in Step 5 of the occupational mix calculation.
Hospitals with a nurse category average hourly wage (as calculated in
Step 4) of greater than the national nurse category average hourly wage
receive an occupational mix adjustment factor (as calculated in Step 6)
of less than 1.0. Hospitals with a nurse category average hourly wage
(as calculated in Step 4) of less than the national nurse category
average hourly wage receive an occupational mix adjustment factor (as
calculated in Step 6) of greater than 1.0.
Based on the 2022 occupational mix survey data, we determined (in
Step 7 of the occupational mix calculation) the following:
National Percentage of Hospital Employees in the Nurse Category: 45%
National Percentage of Hospital Employees in the All Other Occupations
Category: 55%
E. Hospital Redesignations and Reclassifications
The following sections III.E.1 through III.E.4 discuss revisions to
the wage index based on hospital redesignations and reclassifications.
Specifically, hospitals may have their geographic area changed for wage
index payment by applying for urban to rural reclassification under
section 1886(d)(8)(E) of the Act (implemented at Sec. 412.103),
reclassification by the Medicare Geographic Classification Review Board
(MGCRB) under section 1886(d)(10) of the Act, Lugar status
redesignations under section 1886(d)(8)(B) of the Act, or a combination
of the foregoing.
1. Urban to Rural Reclassification Under Section 1886(d)(8)(E) of the
Act, Implemented at Sec. 412.103
Under section 1886(d)(8)(E) of the Act, a qualifying prospective
payment hospital located in an urban area may apply for rural status
for payment purposes separate from reclassification through the MGCRB.
Specifically, section 1886(d)(8)(E) of the Act provides that, not later
than 60 days after the receipt of an application (in a form and manner
determined by the Secretary) from a subsection (d) hospital that
satisfies certain criteria, the Secretary shall treat the hospital as
being located in the rural area (as defined in paragraph (2)(D)) of the
State in which the hospital is located. We refer readers to the
regulations at Sec. 412.103 for the general criteria and application
requirements for a subsection (d) hospital to reclassify from urban to
rural status in accordance with section 1886(d)(8)(E) of the Act (such
hospitals are referred to herein as ``Sec. 412.103 hospitals''). The
FY 2012 IPPS/LTCH PPS final rule (76 FR 51595 through 51596) includes
our policies regarding the effect of wage data from reclassified or
redesignated hospitals. We refer readers to the FY 2024 IPPS/LTCH final
rule (88 FR 58971 through 58977) for a review of our policy finalized
in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49004) to calculate the
rural floor with the wage data of urban hospitals reclassifying to
rural areas under Sec. 412.103, and discussion of our modification to
the calculation of the rural wage index and its implications for the
rural floor.
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41369 through
41374), we codified certain policies regarding multicampus hospitals in
the regulations at Sec. Sec. 412.92, 412.96, 412.103, and 412.108. We
stated that reclassifications from urban to rural
[[Page 18227]]
under Sec. 412.103 apply to the entire hospital (that is, the main
campus and its remote location(s)). We also stated that a main campus
of a hospital cannot obtain Sole Community Hospital (SCH), Rural
Referral Center (RRC), or Medicare Dependent Hospital (MDH) status, or
rural reclassification under Sec. 412.103, independently or separately
from its remote location(s), and vice versa. In the FY 2023 IPPS/LTCH
PPS final rule (87 FR 49012 and 49013), we added Sec. 412.103(a)(8) to
clarify that for a multicampus hospital, approved rural
reclassification status applies to the main campus and any remote
location located in an urban area, including a main campus or any
remote location deemed urban under section 1886(d)(8)(B) of the Act. If
a remote location of a hospital is located in a different CBSA than the
main campus of the hospital, it is CMS' longstanding policy to assign
that remote location a wage index based on its own geographic area to
comply with the statutory requirement to adjust for geographic
differences in hospital wage levels (section 1886(d)(3)(E) of the Act).
Hospitals are required to identify and allocate wages and hours based
on FTEs for remote locations located in different CBSAs on Worksheet S-
2, Part I, Lines 165 and 166 of form CMS-2552-10. In calculating wage
index values, CMS identifies the allocated wage data for these remote
locations in Table 2 with a ``B'' in the 3rd position of the CCN. These
remote locations of hospitals with Sec. 412.103 rural reclassification
status in a different CBSA are identified in Table 2, and hospitals
should evaluate potential wage index outcomes for their remote
location(s) when withdrawing or terminating MGCRB reclassification, or
canceling Sec. 412.103 rural reclassification status.
We also note that in the FY 2025 IPPS/LTCH PPS Final Rule (89 FR
69279 through 69280), we reminded hospitals located in rural areas
becoming urban under the adoption of the revised OMB delineations in FY
2025 that if they have SCH, MDH, or RRC status, they may choose to
apply for a Sec. 412.103 urban to rural reclassification if qualifying
criteria are met to maintain the SCH, MDH, or RRC status. We advised
hospitals to evaluate their options and if desired, apply for Sec.
412.103 urban to rural reclassification before the beginning of FY
2025, to avoid a lapse in SCH, MDH, or RRC status at the beginning of
FY 2025. We note that the ``Am I Rural'' tool currently available on
the Rural Health Information Hub \200\ website at https://www.ruralhealthinfo.org/am-i-rural was updated on November 21, 2024,
based on data provided by the Federal Office of Rural Health Policy
which is available at https://www.hrsa.gov/rural-health/about-us/what-is-rural/data-files. As discussed at Sec. 412.103(f), the duration of
an approved rural reclassification remains in effect without need for
reapproval unless there is a change in the circumstances under which
the classification was approved. If a hospital located in an urban area
was approved for a rural reclassification under Sec. 412.103(a)(1),
that reclassification would no longer be valid if the hospital is no
longer located within a rural census tract of an MSA as determined by
the Federal Office of Rural Health Policy (FORHP) of the Health
Resources and Services Administration (HRSA). Therefore, we encourage
all hospitals and CAHs with active rural reclassifications under
section 1886(d)(8)(E) of the Act to review their original
reclassification application and determine whether the reclassification
status would still apply.
---------------------------------------------------------------------------
\200\ The Rural Health Information Hub is supported by the
Health Resources and Services Administration (HRSA) of HHS under
Grant Number U56RH05539 (Rural Assistance Center for Federal Office
of Rural Health Policy Cooperative Agreement). Any information,
content, or conclusions on this website are those of the authors and
should not be construed as the official position or policy of, nor
should any endorsements be inferred by HRSA, HHS or the U.S.
Government.
---------------------------------------------------------------------------
Finally, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69280), CMS
finalized a policy regarding terminated or ``tied-out'' hospitals, to
address our concerns regarding the impacts these hospitals would have
on rural wage index values. Specifically, we finalized a policy that
Sec. 412.103 reclassifications would be considered cancelled for the
purposes of calculating the area wage index for any hospital with a CCN
listed as terminated or ``tied-out'' as of the date that the hospital
ceased to operate with an active CCN. We stated that we would obtain
and review the best available CCN termination status lists as of the
Sec. 412.103(b)(6) ``lock-in'' date (60 days after the proposed rule
for the FY is displayed in the Federal Register), consistent with the
wage index development timeline. The lock-in date is used to determine
whether a hospital has been approved for Sec. 412.103 reclassification
in time for that status to be included in the upcoming year's wage
index development.
We noted that our policy to consider Sec. 412.103
reclassifications cancelled for the purposes of calculating area wage
index for any hospital with a CCN listed as terminated or ``tied-out''
is not intended to alter or affect the qualification for Critical
Access Hospital (CAH), Sole Community Hospital (SCH), or Rural
Emergency Hospital (REH) statuses or to have other effects unrelated to
hospital wage index calculations. The rural reclassification status
would remain in effect for any period that the original PPS hospital
remains in operation with an active CCN. For REH qualification
requirement purposes, this would include the date of enactment of the
Consolidated Appropriations Act, 2021 (Pub. L. 116-260), which was
December 27, 2020.
2. General Policies and Effects of MGCRB Reclassification and Treatment
of Dual Reclassified Hospitals
Under section 1886(d)(10) of the Act, the MGCRB considers
applications by hospitals for geographic reclassification for purposes
of payment under the IPPS. Hospitals must apply to the MGCRB to
reclassify not later than 13 months prior to the start of the fiscal
year for which reclassification is sought (usually by September 1).
Generally, hospitals must be proximate to the labor market area to
which they are seeking reclassification and must demonstrate
characteristics similar to hospitals located in that area. The MGCRB
issues its decisions not later than the end of February for
reclassifications that become effective for the following fiscal year
(beginning October 1). The regulations applicable to reclassifications
by the MGCRB are located in Sec. Sec. 412.230 through 412.280. (We
refer readers to a discussion in the FY 2002 IPPS final rule (66 FR
39874 and 39875) regarding how the MGCRB defines mileage for purposes
of the proximity requirements.) The general policies for
reclassifications and redesignations and the policies for the effects
of hospitals' reclassifications and redesignations on the wage index
are discussed in the FY 2012 IPPS/LTCH PPS final rule for the FY 2012
final wage index (76 FR 51595 and 51596).
In addition, in the FY 2012 IPPS/LTCH PPS final rule, we discussed
the effects on the wage index of urban hospitals reclassifying to rural
areas under Sec. 412.103. In the FY 2020 IPPS/LTCH PPS final rule (84
FR 42332 through 42336), we finalized a policy to exclude the wage data
of urban hospitals reclassifying to rural areas under Sec. 412.103
from the calculation of the rural floor, but we reverted to the pre-FY
2020 policy in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49002
through 49004). Hospitals that are geographically located in States
without any rural areas are ineligible to apply for rural
reclassification in accordance with the provisions of Sec. 412.103.
[[Page 18228]]
On April 21, 2016, we published an interim final rule with comment
period (IFC) in the Federal Register (81 FR 23428 through 23438) that
included provisions amending our regulations to allow hospitals
nationwide to have simultaneous Sec. 412.103 urban to rural and MGCRB
reclassifications. Prior to this amendment to the regulations,
hospitals had to choose between a Sec. 412.103 urban to rural
reclassification which confers other rural benefits (Medicare
provisions such as payments to disproportionate share hospitals (DSHs),
and non-Medicare payment provisions, such as the 340B Drug Pricing
Program administered by HRSA) besides the wage index under section
1886(d) of the Act or a reclassification under the MGCRB to solely
increase its wage index. Under the amended regulations, a hospital that
has an active MGCRB reclassification and is then approved for an urban
to rural reclassification under Sec. 412.103 will not lose its MGCRB
reclassification. Additionally, a hospital is no longer required to
cancel its Sec. 412.103 reclassification in order to be approved for
an MGCRB reclassification. By amending the regulations and allowing a
hospital to pursue reclassification under the MGCRB while also
maintaining a rural reclassification under Sec. 412.103, hospitals are
accorded the benefits of a Sec. 412.103 urban to rural
reclassification and the ability to use distance and average hourly
wage criteria designated for rural hospitals to obtain a higher wage
index value through an MGCRB reclassification. We note, for wage index
calculation and payment purposes, when there is both a Sec. 412.103
reclassification and an MGCRB reclassification, the MGCRB
reclassification controls for wage index calculation and payment
purposes.
Prior to FY 2024, we excluded hospitals with Sec. 412.103 urban to
rural redesignations from the calculation of the reclassified rural
wage index if they also have an active MGCRB reclassification to
another area. That is, if an application for urban reclassification
through the MGCRB is approved and is not withdrawn or terminated by the
hospital within the established timelines, we considered the hospital's
geographic CBSA and the urban CBSA to which the hospital is
reclassified under the MGCRB for the wage index calculation. We refer
readers to the April 21, 2016, IFC (81 FR 23428 through 23438) and the
FY 2017 IPPS/LTCH PPS final rule (81 FR 56922 through 56930), in which
we finalized the April 21, 2016, IFC, for a full discussion of the
effect of simultaneous reclassifications under both the Sec. 412.103
and the MGCRB processes on wage index calculations. For FY 2024 and
subsequent years, we refer readers to the FY 2024 IPPS/LTCH PPS final
rule for discussion of our policy to include hospitals with a Sec.
412.103 reclassification that also have an active MGCRB
reclassification to another area in the calculation of the reclassified
rural wage index (88 FR 58971 through 58977).
3. MGCRB Reclassification Issues for FY 2026
a. FY 2026 Reclassification Application Requirements and Approvals
As previously stated, under section 1886(d)(10) of the Act, the
MGCRB considers applications by hospitals for geographic
reclassification for purposes of payment under the IPPS. The specific
procedures and rules that apply to the geographic reclassification
process are outlined in regulations under 42 CFR 412.230 through
412.280. There are 639 hospitals approved for wage index
reclassifications by the MGCRB starting in FY 2026. Because MGCRB wage
index reclassifications are effective for 3 years, for FY 2026,
hospitals reclassified beginning in FY 2024 or FY 2025 are eligible to
continue to be reclassified to a particular labor market area based on
such prior reclassifications for the remainder of their 3-year period.
There were 280 hospitals approved for wage index reclassifications in
FY 2024 that will continue for FY 2026, and 278 hospitals approved for
wage index reclassifications in FY 2025 that will continue for FY 2026.
Of all the hospitals approved for reclassification for FY 2024, FY
2025, and FY 2026, 1,197 hospitals (approximately 36 percent of IPPS
hospitals) are in a MGCRB reclassification status for FY 2026 (with 279
of these hospitals reclassified back to their urban geographic
location). We note that several of the 639 hospitals approved for MGCRB
reclassifications beginning in FY 2026 may opt to withdraw this status
after the final rule, and a prior year reclassification may become
effective in its place. We refer readers to section III.F.3.b. of the
preamble of this proposed rule for information on the effects of
implementation of new OMB labor market area delineations on
reclassified hospitals.
Under the regulations at Sec. 412.273, hospitals that have been
reclassified by the MGCRB are permitted to withdraw their applications
if the request for withdrawal is received by the MGCRB any time before
the MGCRB issues a decision on the application, or after the MGCRB
issues a decision, provided the request for withdrawal is received by
the MGCRB within 45 days of the date of filing for public inspection of
the proposed rule at the website of the Office of the Federal Register,
or within 7 calendar days of receiving a decision of the
Administrator's in accordance with Sec. 412.273, whichever is later.
For information about the current process for withdrawing,
terminating, or canceling a previous withdrawal or termination of a 3-
year reclassification for wage index purposes, we refer readers to
Sec. 412.273, as well as section III.E.3.b. of the preamble of this
proposed rule, and the FY 2002 IPPS final rule (66 FR 39887 through
39888) and the FY 2003 IPPS final rule (67 FR 50065 through 50066).
Additional discussion on withdrawals and terminations was included in
the FY 2008 IPPS final rule (72 FR 47333) and the FY 2018 IPPS/LTCH PPS
final rule (82 FR 38148 through 38150).
Applications for FY 2027 reclassifications are due to the MGCRB by
September 2, 2025 (Note: While the deadline for reclassification
applications is not later than 13 months prior to the start of the
fiscal year for which reclassification is sought, usually by September
1, the Board has historically allowed submission up to the first
business day in September, which is September 2, 2025, due to Labor
Day). This is also the current deadline for canceling a previous wage
index reclassification withdrawal or termination under Sec. 412.273(d)
for the FY 2026 cycle.
Applications and other information about MGCRB reclassifications
may be obtained beginning in mid-July 2025 via the internet on the CMS
website at https://www.cms.gov/medicare/regulations-guidance/geographic-classification-review-board. This collection of information
was previously approved under OMB Control Number 0938-0573, which
expired on January 31, 2021. A reinstatement of this PRA package is
currently being developed. The public will have an opportunity to
review and submit comments regarding the reinstatement of this PRA
package through a public notice and comment period separate from this
rulemaking.
b. Proposed Revisions to Sec. 412.273 To Simplify MGCRB Reinstatements
As discussed in the previous section, under the regulations at
Sec. 412.273, hospitals that have been reclassified by the MGCRB are
permitted to withdraw their applications if the request for withdrawal
is received by the MGCRB any time before the MGCRB issues a decision on
the application, or after the
[[Page 18229]]
MGCRB issues a decision, provided the request for withdrawal is
received by the MGCRB within 45 days of the date of filing for public
inspection of the proposed rule at the website of the Office of the
Federal Register, or within 7 calendar days of receiving a decision of
the Administrator's in accordance with Sec. 412.273, whichever is
later. Hospitals may also terminate an existing approved
reclassification, effective for the second and third year of the three
year reclassification period or both, provided the request for
termination is received by the MGCRB within 45 days of the date of
filing for public inspection of the proposed rule at the website of the
Office of the Federal Register, or within 7 calendar days of receiving
a decision of the Administrator's in accordance with Sec. 412.273,
whichever is later.
Furthermore, these withdrawal and termination requests may be
cancelled by submitting a request by the next application deadline for
MGCRB application, reinstating the withdrawn or terminated
reclassification for the remaining years of the reclassification.
We believe this process allows hospitals to maintain flexibility in
choosing the optimal reclassification status for any given fiscal year,
while balancing the need for consistency and predictability of the wage
index system. However, we also believe the regulations Sec. 412.273
can be confusing and contain complicated definitions and language. We
are proposing revisions to multiple paragraphs of Sec. 412.273 to
clarify current policy and revise definitions in a more straightforward
and understandable manner.
The first consideration is CMS's definitions of a withdrawal and a
termination in Sec. 412.273(a). Termination refers to the termination
of an already existing 3-year MGCRB reclassification where such
reclassification has already been in effect for 1 or 2 years, and there
are 1 or 2 years remaining on the 3-year reclassification. A
termination is effective only for the full fiscal year(s) remaining in
the 3-year period at the time the request is received. Requests for
terminations for part of a fiscal year are not considered. Withdrawal
refers to the withdrawal of a 3-year MGCRB reclassification that has
not yet gone into effect or where the MGCRB has not yet issued a
decision on the application.
Stated generally, a withdrawal is an action taken upon a
reclassification that has either not yet been reviewed by the MGCRB, or
an approved reclassification due to go into effect in that upcoming
fiscal year, and a termination is an action taken on an approved
reclassification that has already gone into effect. There are policy
considerations for defining withdrawals and terminations separately.
For example, county group reclassification withdrawals must include all
parties to the application, while a termination may be submitted by any
individual hospital that is party to the application. For reasons
discussed later in this section, we continue to believe this is the
appropriate policy. However, we believe that specifically citing this
policy exception in regulation is more straightforward than maintaining
differing definitions for substantially similar actions. Therefore, for
consistency and simplicity we are proposing to modify the definition of
a withdrawal to only include requests made prior to a decision being
made by the MGCRB. The definition of termination would encompass all
post-decision actions to forgo the upcoming years of an approved
reclassification. Specifically, we are proposing to modify Sec.
412.273(a) to provide that a termination refers to the termination of
an approved 3-year MGCRB reclassification. A termination is effective
only for the full fiscal year(s) remaining in the 3-year period at the
time the request is received. Requests for terminations for part of a
fiscal year are not considered. We would also specify that a withdrawal
refers to the withdrawal of a 3-year MGCRB reclassification where the
MGCRB has not yet issued a decision on the application.
We are also proposing to remove Sec. 412.273(c)(1)(i) and (ii) and
revise paragraph (c)(1) to indicate that a request for withdrawal must
be received by the MGCRB at any time before the MGCRB issues a decision
on the application.
There is also a current process for cancelling an eligible
withdrawal or termination in order to make the reclassification
effective for any remaining years of the 3-year reclassification
period. We note that this process is widely referring to as a request
for ``reinstatement.'' To provide clarity and consistency, we are
proposing to modify several references in Sec. 412.273(d) from
``cancelling'' or a ``cancellation'' to ``reinstating'' or
``reinstatement.'' As we are proposing that withdrawals be limited to
applications prior to approval, a proposed reinstatement would only
apply to the proposed modified definition of a termination. Therefore,
we are proposing to delete the references to withdrawals from Sec.
412.273(d)(1).
As discussed earlier in this section, we continue to believe that
all parties to a county group reclassification must participate on any
action prior to the effective date of a group reclassification. Under
current policy, this would include whether to withdraw a
reclassification in the timeframe described at Sec. 412.273(c)), and
whether to cancel an approved reclassification withdrawal request to
reinstate the remaining second and third year of the approved group
reclassification, as described at Sec. 412.273(d)(2). We believe that
requiring these actions to include all parties to the group
reclassification reduces the possibility of one or more parties
withdrawing from a reclassification to the benefit or detriment of
other hospitals reclassified to that labor market area. For example, a
hospital may be incentivized to withdraw a potentially beneficial
reclassification if the exclusion of its wage data in the reclassified
area would increase the wage index value. This type of manipulation of
reclassification policy does not encourage stability or predictability
of wage index system and is contrary to the concept of providing
hospitals in a county an opportunity to obtain a reclassification that
they may not be able to obtain through an individual reclassification.
Therefore, we are proposing to continue the current policy by modifying
the current regulation to explicitly state that the proposed modified
withdrawal requests and proposed modified termination and reinstatement
requests made prior to the effective date of the reclassification (that
is, any request made prior to the first year the reclassification goes
into effect), must include all parties to the application.
Specifically, we are proposing to modify Sec. 412.273(e), by modifying
paragraph (e)(2) to state that a request to terminate an approved
individual reclassification must be submitted in writing to the MGCRB
according to the method prescribed by the MGCRB and adding a new
paragraph (e)(3) specifying that a request to terminate or reinstate an
approved group reclassification must be submitted in writing to the
MGCRB according to the method prescribed by the MGCRB. A request to
terminate or reinstate an approved group reclassification that has not
yet gone into effect must include all hospitals party to the
reclassification. Termination requests for group reclassification for
the second or third year of the 3-year wage index reclassification
period and reinstatement requests for a group reclassification
effective for the third
[[Page 18230]]
year of the 3-year wage index reclassification period may be submitted
by any individual hospital that is party to the reclassification.
We believe that this proposal to explicitly state this policy
regarding county group reclassification in regulation reduces confusion
for hospitals and more clearly addresses our intent.
To provide clarity, we are also proposing to state that a
termination of a 3-year reclassification defined at Sec. 412.273(d)(4)
is not eligible to be reinstated. This type of termination of an
approved reclassification occurs when a hospital receives a different
MGCRB reclassification in a subsequent fiscal year. Under current
policy, hospitals may effectively choose between accepting a newly
approved reclassification, or to withdraw it and ``fallback'' to a
previously approved reclassification. We believe this provides
sufficient flexibility for hospitals to obtain the most beneficial
reclassification. However, once an approved reclassification goes into
effect, we believe it is appropriate to permanently terminate other
previously approved reclassifications. Doing so provides a degree of
predictability and consistency in the wage index calculations by
limiting hospitals to a total of two potential MGCRB reclassification
options. This is the current policy of CMS and the current practice of
the MGCRB. We are proposing specifically state this policy in
regulation by providing in Sec. 412.273(d)(4) that the terminated
reclassification in such a case is not eligible for reinstatement.
We are proposing the preceding changes to become effective for
requests made beginning in FY 2026. The current policies and
definitions will continue for the remainder of FY 2025. We note that
hospitals currently use the Office of Hearings Case and Document
Management System (OH CDMS) to enter and maintain their MGCRB cases,
and to correspond with the Office of Hearings. We are aware that the
proposed changes will require system changes to the OH CDMS, and there
could be some delay in revising certain terminology. However, nothing
in the section is intended to significantly modify current policies and
practices. Instead, it serves to clarify and simplify the process of
determining whether an approved reclassification should be accepted and
applied in a given fiscal year. We also believe that in making these
changes, the regulation will provide clearer instructions to hospitals.
Finally, we note that under the current and proposed policies,
there is no negative effect for a hospital to reinstate (cancel a
withdrawal or termination) for a subsequent year, as the
reclassification could be terminated in the following year, and
hospitals are eligible to reapply for wage index reclassification to a
different labor market area. When eligible, a large majority of
hospitals already do this, as it provides greater flexibility and
options for wage index reclassification. Before the introduction of the
OH CDMS, these reinstatement requests were often submitted
simultaneously with a withdrawal or termination request. However, in
the online system, the option to reinstate is typically only made
available after all withdrawal and termination requests have been
processed. We have considered a policy modification to make termination
requests effective for only one fiscal year. That is, all requests to
withdraw or terminate a reclassification made in the timeframe
specified at Sec. 412.273(c) would automatically be reinstated for any
remaining fiscal years, without the need of a second action to
reinstate it. We have not fully evaluated the impact of such a policy
but may consider it in future rulemaking.
4. Redesignations Under Section 1886(d)(8)(B) of the Act
a. Lugar Status Determinations
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through
51600), we adopted the policy that, beginning with FY 2012, an eligible
hospital that waives its Lugar status to receive the out-migration
adjustment has effectively waived its deemed urban status and, thus, is
rural for all purposes under the IPPS effective for the fiscal year in
which the hospital receives the outmigration adjustment. In addition,
in that rule, we adopted a minor procedural change that would allow a
Lugar hospital that qualifies for and accepts the out-migration
adjustment (through written notification to CMS within 45 days from the
issuance of the proposed rule in the Federal Register) to waive its
urban status for the full 3-year period for which its out-migration
adjustment is effective. By doing so, such a Lugar hospital would no
longer be required during the second and third years of eligibility for
the out-migration adjustment to advise us annually that it prefers to
continue being treated as rural and receive the out-migration
adjustment. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 56930), we
further clarified that if a hospital wishes to reinstate its urban
status for any fiscal year within this 3-year period, it must send a
request to CMS within 45 days of the issuance of the proposed rule in
the Federal Register for that particular fiscal year. We indicated that
such reinstatement requests may be sent electronically to
[email protected]. In the FY 2018 IPPS/LTCH PPS final rule (82 FR
38147 through 38148), we finalized a policy revision to require a Lugar
hospital that qualifies for and accepts the out-migration adjustment,
or that no longer wishes to accept the out-migration adjustment and
instead elects to return to its deemed urban status, to notify CMS
within 45 days from the date of public display of the proposed rule at
the Office of the Federal Register. These revised notification
timeframes were effective beginning October 1, 2017. In addition, in
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38148), we clarified that
both requests to waive and to reinstate ``Lugar'' status may be sent to
[email protected]. To ensure proper accounting, we request
hospitals to include their CCN, and either ``waive Lugar'' or
``reinstate Lugar'', in the subject line of these requests. When
applicable, this election would result in a cancelation of a hospital's
rural reclassification status under Sec. 412.103, effective October 1,
2025. We also inform hospitals that for the request to be approved, the
hospital must withdraw or terminate any active MGCRB reclassification.
All requests, once approved, will remain in effect for the remainder of
the 3-year out-migration adjustment period.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42314 and 42315), we
clarified that in circumstances where an eligible hospital elects to
receive the outmigration adjustment within 45 days of the public
display date of the proposed rule at the Office of the Federal Register
in lieu of its Lugar wage index reclassification, and the county in
which the hospital is located would no longer qualify for an
outmigration adjustment when the final rule (or a subsequent correction
notice) wage index calculations are completed, the hospital's request
to accept the outmigration adjustment would be denied, and the hospital
would be automatically assigned to its deemed urban status under
section 1886(d)(8)(B) of the Act. We stated that final rule wage index
values would be recalculated to reflect this reclassification, and in
some instances, after taking into account this reclassification, the
out-migration adjustment for the county in question could be restored
in the final rule. However, as the hospital is assigned a Lugar
reclassification under section
[[Page 18231]]
1886(d)(8)(B) of the Act, it would be ineligible to receive the county
outmigration adjustment under section 1886(d)(13)(G) of the Act.
F. Wage Index Adjustments: Rural Floor, Imputed Floor, State Frontier
Floor, Out-Migration Adjustment, Low Wage Index Hospital, and Cap on
Wage Index Decrease Policies
The following adjustments to the wage index are listed in the order
that they are generally applied. First, the rural floor, imputed floor,
and state frontier floor provide a minimum wage index. The rural floor
at section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33)
provides that the wage index for hospitals in urban areas of a State
may not be less than the wage index applicable to hospitals located in
rural areas in that State. The imputed floor at section
1886(d)(3)(E)(iv) of the Act provides a wage index minimum for all-
urban states. The state frontier floor at section 1886(d)(3)(E)(iii) of
the Act requires that hospitals in frontier states cannot be assigned a
wage index of less than 1.0000. Next, the out-migration adjustment at
section 1886(d)(13)(A) of the Act is applied, potentially increasing
the wage index for hospitals located in certain counties that have a
relatively high percentage of hospital employees who reside in the
county but work in a different county or counties with a higher wage
index. For FY 2026 and subsequent fiscal years, as discussed later in
this section, after considering the D.C. Circuit's decision in
Bridgeport Hosp. v. Becerra, we are proposing to discontinue the low
wage index hospital policy. Because we are proposing to discontinue the
low wage index hospital policy for FY 2026 and subsequent fiscal years,
we would no longer apply a low wage index budget neutrality factor to
the standardized amounts. Finally, all hospital wage index decreases
are capped at 95 percent of the hospital's final wage index in the
prior fiscal year, according to the policy finalized in the FY 2023
IPPS/LTCH PPS final rule (87 FR 49018 through 49021).
1. Rural Floor
Section 4410(a) of the Balanced Budget Act of 1997 (Pub. L. 105-33)
provides that, for discharges on or after October 1, 1997, the area
wage index applicable to any hospital that is located in an urban area
of a State may not be less than the area wage index applicable to
hospitals located in rural areas in that State. This provision is
referred to as the rural floor. Section 3141 of the Patient Protection
and Affordable Care Act (Pub. L. 111-148) also requires that a national
budget neutrality adjustment be applied in implementing the rural
floor. Based on the FY 2026 wage index associated with this proposed
rule (which is available on the CMS website), and based on the
calculation of the rural floor including the wage data of hospitals
that have reclassified as rural under Sec. 412.103, we estimate that
565 hospitals would receive the rural floor in FY 2026. The budget
neutrality impact of the proposed application of the rural floor is
discussed in section II.A.4.e. of Addendum A of this proposed rule.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 48784), CMS
finalized a policy change to calculate the rural floor in the same
manner as we did prior to the FY 2020 IPPS/LTCH PPS final rule, in
which the rural wage index sets the rural floor. We stated that for FY
2023 and subsequent years, we would include the wage data of Sec.
412.103 hospitals that have no Medicare Geographic Classification
Review Board (MGCRB) reclassification in the calculation of the rural
floor, and include the wage data of such hospitals in the calculation
of ``the wage index for rural areas in the State in which the county is
located'' as referred to in section 1886(d)(8)(C)(iii) of the Act.
In the FY 2024 IPPS/LTCH final rule (88 FR 58971 through 58977), we
finalized a policy change beginning that year to include the data of
all Sec. 412.103 hospitals, even those that have an MGCRB
reclassification, in the calculation of the rural floor and the
calculation of ``the wage index for rural areas in the State in which
the county is located'' as referred to in section 1886(d)(8)(C)(iii) of
the Act. We explained that after revisiting the case law, prior public
comments, and the relevant statutory language, we agreed that the best
reading of section 1886(d)(8)(E)'s text that CMS ``shall treat the
[Sec. 412.103] hospital as being located in the rural area'' is that
it instructs CMS to treat Sec. 412.103 hospitals the same as
geographically rural hospitals for the wage index calculation.
Accordingly, in the FY 2024 IPPS/LTCH PPS final rule, we finalized
a policy to include hospitals with Sec. 412.103 reclassification along
with geographically rural hospitals in all rural wage index
calculations, and to exclude ``dual reclass'' hospitals (hospitals with
simultaneous Sec. 412.103 and MGCRB reclassifications) that are
implicated by the hold harmless provision at section 1886(d)(8)(C)(ii)
of the Act. (For additional information on these changes, we refer
readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR 58971 through
58977).)
2. Imputed Floor
In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we
adopted the imputed floor policy as a temporary 3-year regulatory
measure to address concerns from hospitals in all-urban States that
have stated that they are disadvantaged by the absence of rural
hospitals to set a wage index floor for those States. We extended the
imputed floor policy eight times since its initial implementation, the
last of which was adopted in the FY 2018 IPPS/LTCH PPS final rule and
expired on September 30, 2018. We refer readers to further discussions
of the imputed floor in the IPPS/LTCH PPS final rules from FYs 2014
through 2019 (78 FR 50589 through 50590, 79 FR 49969 through 49971, 80
FR 49497 through 49498, 81 FR 56921 through 56922, 82 FR 38138 through
38142, and 83 FR 41376 through 41380, respectively) and to the
regulations at Sec. 412.64(h)(4). For FYs 2019, 2020, and 2021,
hospitals in all-urban states received a wage index that was calculated
without applying an imputed floor, and we no longer included the
imputed floor as a factor in the national budget neutrality adjustment.
Section 9831 of the American Rescue Plan Act of 2021 (Pub. L. 117-
2), enacted on March 11, 2021, amended section 1886(d)(3)(E)(i) of the
Act and added section 1886(d)(3)(E)(iv) of the Act to establish a
minimum area wage index for hospitals in all-urban States for
discharges occurring on or after October 1, 2021. Specifically, section
1886(d)(3)(E)(iv)(I) and (II) of the Act provides that for discharges
occurring on or after October 1, 2021, the area wage index applicable
to any hospital in an all-urban State may not be less than the minimum
area wage index for the fiscal year for hospitals in that State
established using the methodology described in Sec. 412.64(h)(4)(vi)
as in effect for FY 2018. Unlike the imputed floor that was in effect
from FYs 2005 through 2018, section 1886(d)(3)(E)(iv)(III) of the Act
provides that the imputed floor wage index shall not be applied in a
budget neutral manner. Section 1886(d)(3)(E)(iv)(IV) of the Act
provides that, for purposes of the imputed floor wage index under
clause (iv), the term all-urban State means a State in which there are
no rural areas (as defined in section 1886(d)(2)(D) of the Act) or a
State in which there are no hospitals classified as rural under section
1886 of the Act. Under this definition, given that it applies for
purposes of the imputed floor wage index, we consider a hospital to be
classified as rural under section
[[Page 18232]]
1886 of the Act if it is assigned the State's rural area wage index
value.
Effective beginning October 1, 2021 (FY 2022), section
1886(d)(3)(E)(iv) of the Act reinstated the imputed floor wage index
policy for all-urban States, with no expiration date, using the
methodology described in Sec. 412.64(h)(4)(vi) as in effect for FY
2018. We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR
45176 through 45178) for further discussion of the original imputed
floor calculation methodology implemented in FY 2005 and the
alternative methodology implemented in FY 2013.
Based on data available for this proposed rule, States that will be
all-urban States as defined in section 1886(d)(3)(E)(iv)(IV) of the
Act, and thus hospitals in such States that will be eligible to receive
an increase in their wage index due to application of the imputed floor
for FY 2026, are identified in Table 3 (which is available on the CMS
website) associated with this proposed rule.
The regulations at Sec. 412.64(e)(1) and (4) and (h)(4) and (5)
implement the imputed floor required by section 1886(d)(3)(E)(iv) of
the Act for discharges occurring on or after October 1, 2021. The
imputed floor will continue to be applied for FY 2026 in accordance
with the policies adopted in the FY 2022 IPPS/LTCH PPS final rule. For
more information regarding our implementation of the imputed floor
required by section 1886(d)(3)(E)(iv) of the Act, we refer readers to
the discussion in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45176
through 45178).
3. State Frontier Floor for FY 2026
Section 10324 of Public Law 111-148 requires that hospitals in
frontier States cannot be assigned a wage index of less than 1.0000.
(We refer readers to the regulations at Sec. 412.64(m) and to a
discussion of the implementation of this provision in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 through 50161).) We are not proposing
any changes to the frontier floor policy for FY 2026. In this proposed
rule, 40 hospitals would receive the frontier floor value of 1.0000 for
their FY 2026 proposed wage index. These hospitals are located in
Montana, North Dakota, South Dakota, and Wyoming. We note that while
Nevada meets the criteria of a frontier State, all hospitals within the
State currently receive a wage index value greater than 1.0000.
The areas affected by the rural and frontier floor policies for the
proposed FY 2026 wage index are identified in Table 3 associated with
this proposed rule, which is available via the internet on the CMS
website.
4. Proposed Out-Migration Adjustment Based on Commuting Patterns of
Hospital Employees
In accordance with section 1886(d)(13) of the Act, as added by
section 505 of Public Law 108-173, beginning with FY 2005, we
established a process to make adjustments to the hospital wage index
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS
final rule (69 FR 49061), provides for an increase in the wage index
for hospitals located in certain counties that have a relatively high
percentage of hospital employees who reside in the county but work in a
different county (or counties) with a higher wage index.
Section 1886(d)(13)(B) of the Act requires the Secretary to use
data the Secretary determines to be appropriate to establish the
qualifying counties. When the provision of section 1886(d)(13) of the
Act was implemented for the FY 2005 wage index, we analyzed commuting
data compiled by the U.S. Census Bureau that were derived from a
special tabulation of the 2000 Census journey-to-work data for all
industries (CMS extracted data applicable to hospitals). These data
were compiled from responses to the ``long-form'' survey, which the
Census Bureau used at that time, and which contained questions on where
residents in each county worked (69 FR 49062). However, the 2010 Census
was ``short form'' only; information on where residents in each county
worked was not collected as part of the 2010 Census. The Census Bureau
worked with CMS to provide an alternative dataset based on the latest
available data on where residents in each county worked in 2010, for
use in developing a new out-migration adjustment based on new commuting
patterns developed from the 2010 Census data beginning with FY 2016.
To determine the out-migration adjustments and applicable counties
for FY 2016, we analyzed commuting data compiled by the Census Bureau
that were derived from a custom tabulation of the American Community
Survey (ACS), an official Census Bureau survey, utilizing 2008 through
2012 (5-year) Microdata. The data were compiled from responses to the
ACS questions regarding the county where workers reside and the county
to which workers commute. As we discussed in prior IPPS/LTCH PPS final
rules, we have applied the same policies, procedures, and computations
since FY 2012. We refer readers to the FY 2016 IPPS/LTCH PPS final rule
(80 FR 49500 through 49502) for a full explanation of the revised data
source. We also stated that we would consider determining out-migration
adjustments based on data from the next Census or other available data,
as appropriate.
As discussed above in section III.A.2., in the FY 2025 IPPS/LTCH
PPS final rule (89 FR 69253 through 69266), CMS adopted revised
delineations from the OMB Bulletin 23-01, published July 21, 2023. The
revised delineations incorporated population estimates based on the
2020 decennial census, as well as updated journey-to-work commuting
data. The Census Bureau once again worked with CMS to provide an
alternative dataset based on the latest available data on where
residents in each county worked, for use in developing a new out-
migration adjustment based on new commuting patterns. We analyzed
commuting data compiled by the Census Bureau that were derived from a
custom tabulation of the ACS, utilizing 2016 through 2020 data. The
Census Bureau produces county level commuting flow tables every 5 years
using non-overlapping 5-year ACS estimates. The data include
demographic characteristics, home and work locations, and journey-to-
work travel flows. The custom tabulation requested by CMS was specific
to general medical and surgical hospital and specialty (except
psychiatric and substance use disorder treatment) hospital employees
(hospital sector Census code 8191/NAICS code 6221 and 6223) who worked
in the 50 States, Washington, DC, and Puerto Rico and, therefore,
provided information about commuting patterns of workers at the county
level for residents of the 50 States, Washington, DC, and Puerto Rico.
For the ACS, the Census Bureau selects a random sample of addresses
where workers reside to be included in the survey, and the sample is
designed to ensure good geographic coverage. The ACS samples
approximately 3.5 million resident addresses per year.\201\ The results
of the ACS are used to formulate descriptive population estimates, and,
as such, the sample on which the dataset is based represents the actual
figures that would be obtained from a complete count.
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\201\ According to the Census Bureau, the effects of the public
health emergency (PHE) on ACS activities in 2020 resulted in a lower
number of addresses (~2.9 million) in the sample, as well as fewer
interviews than a typical year.
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In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69301), we finalized
that for
[[Page 18233]]
FY 2025 and subsequent years, the out-migration adjustment would be
based on the data derived from the previously discussed custom
tabulation of the ACS utilizing 2016 through 2020 (5-year) Microdata.
As discussed earlier, we believe that these data are the most
appropriate to establish qualifying counties, because they are the most
accurate and up-to-date data that are available to us. For FY 2026, we
are not proposing any changes to the methodology or data source for
calculating the out-migration adjustment. Specifically, we are
proposing that the FY 2026 out-migration adjustments continue to be
based on the same policies, procedures, and computation that were used
for the FY 2012 out-migration adjustment. We have applied these same
policies, procedures, and computations since FY 2012, and we believe
they continue to be appropriate for FY 2026. We refer readers to a full
discussion of the out-migration adjustment, including rules on deeming
hospitals reclassified under section 1886(d)(8) or section 1886(d)(10)
of the Act to have waived the out-migration adjustment, in the FY 2012
IPPS/LTCH PPS final rule (76 FR 51601 through 51602). Table 2 of this
proposed rule (which is available on the CMS website) lists the
proposed out-migration adjustments for the FY 2026 wage index. In
addition, Table 4A associated with this proposed rule, ``List of
Counties Eligible for the Out Migration Adjustment under Section
1886(d)(13) of the Act'' (also available on the CMS website), consists
of the following: A list of counties that are eligible for the
outmigration adjustment for FY 2026 identified by FIPS county code, the
proposed FY 2026 out-migration adjustment, and the number of years the
adjustment will be in effect. We refer readers to section V.I. of the
Addendum of this proposed rule for instructions on accessing IPPS
tables that are posted on the CMS websites identified in this proposed
rule.
5. Discontinuation of the Low Wage Index Hospital Policy and Budget
Neutrality Adjustment
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through
42339), we finalized a policy to address increasing wage index
disparities, based in part on comments we received in response to our
request for information included in our FY 2019 IPPS/LTCH PPS proposed
rule (83 FR 20372 through 20377). Accordingly, we finalized a policy
that provided certain low wage index hospitals with an opportunity to
increase employee compensation without the usual lag in those increases
being reflected in the calculation of the wage index (as they would
expect to do if not for the lag). We accomplished this by temporarily
increasing the wage index values for certain hospitals with low wage
index values and doing so in a budget neutral manner through an
adjustment applied to the standardized amounts for all hospitals. We
increased the wage index for hospitals with a wage index value below
the 25th percentile wage index value for a fiscal year by half the
difference between the otherwise applicable final wage index value for
a year for that hospital and the 25th percentile wage index value for
that year across all hospitals (the low wage index hospital policy).
When we adopted the low wage index hospital policy in the FY 2020
IPPS/LTCH PPS final rule (84 FR 42326 through 42328), we stated our
intention that this policy would be effective for at least 4 years,
beginning in FY 2020, to allow employee compensation increases
implemented by these hospitals sufficient time to be reflected in the
wage index calculation. We also stated we intended to revisit the issue
of the duration of this policy in future rulemaking as we gained
experience under the policy. For FY 2024, we continued to apply the low
wage index hospital policy and the related budget neutrality adjustment
(88 FR 58977 through 58980). In the FY 2025 IPPS/LTCH PPS final rule
(89 FR 69301 through 69308), we adopted an extension of the low wage
index hospital policy and the related budget neutrality adjustment
effective for at least three more years, beginning in FY 2025, in order
for sufficient wage data from after the end of the COVID-19 Public
Health Emergency to become available.
On July 23, 2024, the Court of Appeals for the D.C. Circuit held
that the Secretary lacked authority under section 1886(d)(3)(E) of the
Act or under the ``adjustments'' language of section 1886(d)(5)(I)(i)
of the Act to adopt the low wage index hospital policy for FY 2020, and
that the policy and related budget neutrality adjustment must be
vacated.\202\ After considering the D.C. Circuit's decision in
Bridgeport Hosp. v. Becerra, in the interim final action with comment
period (IFC) titled ``Medicare Program; Changes to the Fiscal Year 2025
Hospital Inpatient Prospective Payment System (IPPS) Rates Due to Court
Decision'' (referred to herein as the FY 2025 IFC) (89 FR 80405 through
80421), we recalculated the FY 2025 IPPS hospital wage index to remove
the low wage index hospital policy for FY 2025. We also removed the low
wage index budget neutrality factor from the FY 2025 standardized
amounts. We refer the reader to the applicable year final rule
discussions (FY 2020 IPPS/LTCH PPS final rule (84 FR 42325 through
42339); FY 2024 IPPS/LTCH PPS final rule (88 FR 58977 through 58980))
regarding the implementation of the low wage index hospital policy and
the FY 2025 IFC for a complete discussion regarding the removal of the
low wage index hospital policy for FY 2025.
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\202\ Bridgeport Hosp. v. Becerra, 108 F.4th 882, 887-91 & n.6
(D.C. Cir. 2024).
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For FY 2026 and subsequent fiscal years, after considering the D.C.
Circuit's decision in Bridgeport Hosp. v. Becerra, we are proposing to
discontinue the low wage index hospital policy. Because we are
proposing to discontinue the low wage index hospital policy for FY 2026
and subsequent fiscal years, we would no longer apply a low wage index
budget neutrality factor to the standardized amounts.
6. Cap on Wage Index Decreases and Budget Neutrality Adjustment
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 through
49021), we finalized a wage index cap policy and associated budget
neutrality adjustment for FY 2023 and subsequent fiscal years. Under
this policy, we apply a 5-percent cap on any decrease to a hospital's
wage index from its wage index in the prior FY, regardless of the
circumstances causing the decline. A hospital's wage index will not be
less than 95 percent of its final wage index for the prior FY. If a
hospital's prior FY wage index is calculated with the application of
the 5-percent cap, the following year's wage index will not be less
than 95 percent of the hospital's capped wage index in the prior FY. We
note, the FY 2025 wage index was established in the FY 2025 Interim
Final Action with Comment (IFC) which removed the low wage index
hospital policy (89 FR 80405 through 80421). Therefore, for FY 2026,
the prior year wage index for purposes of the cap would be based on the
wage index established in the IFC. We also note that in that same IFC,
we established a transitional payment exception for FY 2025. The 5-
percent cap for FY 2026 would be applied irrespective of the FY 2025
transitional payment exception. We finally note, as discussed below,
that for FY 2026 we are also proposing a transitional payment exception
that addresses the effects of the removal of the low wage index
hospital policy. This proposed transitional payment exception would be
applied after the application of the 5-percent cap.
[[Page 18234]]
Except for newly opened hospitals, we apply the cap for a FY using
the final wage index applicable to the hospital on the last day of the
prior FY. A newly opened hospital will be paid the wage index for the
area in which it is geographically located for its first full or
partial fiscal year, and it will not receive a cap for that first year,
because it will not have been assigned a wage index in the prior year.
The wage index cap policy is reflected at Sec. 412.64(h)(7). We apply
the cap in a budget neutral manner through a national adjustment to the
standardized amount each fiscal year. For more information about the
wage index cap policy and associated budget neutrality adjustment, we
refer readers to the discussion in the FY 2023 IPPS/LTCH PPS final rule
(87 FR 49018 through 49021).
For FY 2026, we would apply the wage index cap and associated
budget neutrality adjustment in accordance with the policies adopted in
the FY 2023 IPPS/LTCH PPS final rule. We note that the budget
neutrality adjustment will be updated, as appropriate, based on the
final rule data. We refer readers to the Addendum of this proposed rule
for further information regarding the budget neutrality calculations.
7. Proposed Transition for the Discontinuation of the Low Wage Index
Hospital Policy
As discussed above, in the FY 2025 IFC we recalculated the FY 2025
IPPS hospital wage index to remove the low wage index hospital policy
for FY 2025. We also removed the low wage index budget neutrality
factor from the FY 2025 standardized amounts. For FY 2026 and
subsequent fiscal years, consistent with the FY 2025 IFC, after
considering the D.C. Circuit's decision in Bridgeport Hosp. v. Becerra,
we are proposing to discontinue the low wage index hospital policy.
Because we are proposing to discontinue the low wage index hospital
policy for FY 2026 and subsequent fiscal years, we would no longer
apply the low wage index budget neutrality factor to the standardized
amounts.
In the past, we have established temporary transition policies when
there have been significant changes to payment policies, and we have
limited the duration of each transition in order to phase in the
effects of those payment policy changes. In taking this temporary
approach in the past, we have sought to mitigate short-term instability
and payment fluctuations that can negatively impact hospitals
consistent with principles of certainty and predictability under
prospective payment systems. For example, CMS has recognized that
hospitals in certain areas may experience a negative impact on their
IPPS payment due to the adoption of revised OMB delineations for wage
index purposes and has finalized transition policies to mitigate
negative financial impacts and provide stability to year-to-year wage
index variations. We refer readers to the FY 2015 IPPS/LTCH PPS final
rule (79 FR 49956 through 49962) for a discussion of the transition
period finalized when CMS adopted revised OMB delineations after the
2010 decennial census. For FY 2025, consistent with our past practice,
we established an interim transition policy for hospitals significantly
impacted by the removal of the FY 2025 low wage index hospital policy
using our authority under section 1886(d)(5)(I) of the Act.
Specifically, the transitional payment exception for FY 2025 for those
hospitals is equal to the additional FY 2025 amount a hospital would
have been paid under the IPPS if its FY 2025 wage index were equal to
95 percent of its FY 2024 wage index. For a discussion of the removal
of the low wage index hospital policy and the establishment of the
interim transition policy, we refer readers to the FY 2025 IFC (89 FR
80405 through 80421).
We currently have a wage index cap policy at 42 CFR 412.64(h)(7),
under which we apply a 5-percent cap on any decrease to a hospital's
wage index from its wage index in the prior FY in a budget neutral
manner, regardless of the circumstances causing the decline, so that a
hospital's final wage index for the upcoming fiscal year will not be
less than 95 percent of its final wage index from the prior fiscal
year. In accordance with 42 CFR 412.64(e)(1)(ii), CMS applies a budget
neutrality adjustment to offset the increase in total payments
resulting from the application of that cap.
Some hospitals that previously benefitted from the low wage index
hospital policy would experience decreases of 10 percent or more over
the two years from their FY 2024 wage index (with the low wage index
hospital policy applied) to their proposed FY 2026 wage index (that is,
approximately 5 percent or more per year over that time period).
Similar to how 42 CFR 412.64(h)(7) would operate, and how our interim
transitional policy established in the FY 2025 IFC for these hospitals
operates in FY 2025, we are proposing to establish a narrow
transitional exception to the calculation of FY 2026 payments for these
hospitals.
As described above, if the combined payment effect of the FY 2025
wage index and the transitional payment exception for FY 2025 had been
attributable solely to the FY 2025 wage index, then the wage index cap
policy at 42 CFR 412.64(h)(7) would have mitigated these FY 2026 wage
index decreases and would have done so in a budget neutral manner under
our current regulations. As discussed in the FY 2025 IFC (89 FR 80407-
80408), while CMS is not necessarily required by the statute to budget
neutralize every exception or adjustment under section 1886(d)(5)(I),
it has often done so by exercising its discretion under section
1886(d)(5)(I) of the Act twice: first to adopt an exception or
adjustment, and then again to make that exception or adjustment budget
neutral.\203\ For the FY 2025 interim transition policy, under the
unique circumstances and due to the timing of the appellate court's
decision in Bridgeport Hosp. v. Becerra so close to the beginning of FY
2025, we declined to exercise our discretion to budget neutralize that
interim FY 2025 transition policy. We stated that unlike most policies
relevant to the calculation of the hospital wage index, the timing of
the court's decision shortly before the beginning of the fiscal year
necessitated swift action by the agency via an IFC, rather than
providing for prior notice and opportunity for comment. The agency's
action in that IFC was intended to promote certainty regarding FY 2025
IPPS payments in light of the reasoning of Bridgeport, which risked
creating ongoing confusion for hospitals extending into FY 2025 about
the amount of their IPPS payments. In that circumstance, the lack of an
opportunity to notify interested parties in a notice of proposed
rulemaking about changes to their wage index that would result from
budget neutralizing the transition policy, and for the agency to
consider before the policy's effective date issues hospitals might
raise when commenting on those changes, weighed in favor of an approach
that did not adversely affect the significant majority of hospitals.
For these reasons, and as discussed in the IFC, we declined to budget
neutralize the interim FY 2025 transition policy.
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\203\ For example, CMS has stated in the past that it would
exercise its discretion under section 1886(d)(5)(I) of the Act to
make the low wage index hospital policy budget neutral even if
budget neutrality were not required by statute (88 FR 58979).
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In contrast, we are proposing the FY 2026 transition policy under
very different circumstances. We are not facing the timing constraints
of a court decision issued shortly before the beginning of a fiscal
year that necessitated swift action through an IFC to promote certainty
and prevent ongoing confusion by hospitals. Rather,
[[Page 18235]]
we are proposing the FY 2026 transition policy through the normal
course of our annual rulemaking for the IPPS, which will allow both for
advance notice of the policy and for us to consider issues interested
parties might raise in comments on this proposed rule. We are proposing
to make this policy budget neutral through an adjustment applied to the
standardized amount for all hospitals because (1) the wage index cap
policy at 42 CFR 412.64(h)(7) would have mitigated these FY 2026 wage
index decreases had the combined payment effect of the FY 2025 wage
index and the transitional payment exception been reflected solely in
the FY 2025 wage index, and it would have done so in a budget neutral
manner under our current regulations, and (2) the circumstances
described above that caused us to decline to budget neutralize the
interim FY 2025 transition policy are not applicable to the proposed FY
2026 transition policy. In addition, we note that implementing the
proposed FY 2026 transition policy in a budget neutral manner would be
consistent with past practice. For example, we budget neutralized the
FY 2015 wage index transition budget neutrality policy discussed
earlier (79 FR 49956 through 49962). As we have discussed in other
instances (89 FR 19398), we believed, and continue to believe, that
transition policies should not increase estimated aggregate Medicare
payments beyond the payments that would be made had we never proposed
these transition policies. Therefore, we are proposing to use our
authority under section 1886(d)(5)(I)(i) of the Act twice. First, we
are proposing to adopt a narrow transitional exception to the
calculation of FY 2026 IPPS payments for low wage index hospitals
significantly impacted by the discontinuation of the low wage index
hospital policy. Second, we are exercising our authority again to do so
in a budget neutral manner.204 205 We refer the reader to
section II.A.4.g. of the Addendum of this proposed rule for complete
details regarding the application of the proposed transition for the
discontinuation of the low wage index hospital policy budget neutrality
factor.
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\204\ We note that even more so than was the case for the FY
2025 interim transition policy, the scope and magnitude of the
proposed FY 2026 transitional policy are much smaller than the low
wage index hospital policy. As discussed in section VI. of the
preamble of this proposed rule, we estimate only 52 hospitals out of
the over 3,000 hospitals paid under the IPPS would receive proposed
FY 2026 transitional exception payments, and the total payment
impact of the proposed transitional policy is an increase in IPPS
operating payments by approximately $27 million. For the FY 2025
interim transition policy the corresponding figures were 113
hospitals and an increase in IPPS operating payments by
approximately $37 million (89 FR 80417).
\205\ We note that because creating an exception to the
calculation of the FY 2026 payments is in this circumstance
functionally equivalent to adjusting the FY 2026 payments, the
proposed transitional exception can be alternatively considered a
proposed transitional adjustment.
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The transitional exception policy we are proposing applies to
hospitals that benefitted from the FY 2024 low wage index hospital
policy. For those hospitals, we compare the hospital's proposed FY 2026
wage index to the hospital's FY 2024 wage index. If the hospital is
significantly impacted by the discontinuation of the low wage index
hospital policy, meaning the hospital's proposed FY 2026 wage index is
decreasing by more than 9.75 percent \206\ from the hospital's FY 2024
wage index, then the transitional payment exception for FY 2026 for
that hospital would be equal to the additional FY 2026 amount the
hospital would be paid under the IPPS if its FY 2026 wage index were
equal to 90.25 percent \207\ of its FY 2024 wage index.\208\ We note
this proposed transitional payment exception would be applied after the
application of the 5-percent cap described at 42 CFR 412.64(h)(7). For
example, assume the FY 2024 wage index for a hospital that benefitted
from the low wage index hospital policy is 0.7600, and the hospital's
proposed FY 2026 wage index is 0.6500. (If applicable, this proposed FY
2026 wage index value would include the 5-percent cap based on a
comparison of the hospital's FY 2026 wage index prior to application of
the 5-percent cap, to the hospital's FY 2025 wage index. We note the FY
2025 wage index that will be used in this comparison is generally the
FY 2025 wage index listed in Table 2 from the FY 2025 IFC in the column
labeled ``FY 2025 Wage Index With Cap''. We note all hospitals,
regardless of whether the cap was applied to their FY 2025 wage index,
have a value in the column ``FY 2025 Wage Index With Cap''. Hospitals
that did not have a cap applied to their FY 2025 wage index will
display a wage index in this column without the cap.) The hospital's
proposed FY 2026 wage index is decreasing by more than 9.75 percent
from the hospital's FY 2024 wage index [that is, 0.6500 < 0.6859 where
0.6859 = (0.9025 times 0.7600)]. The proposed transitional payment
exception for FY 2026 for this hospital is equal to the additional
amount the hospital would be paid under the IPPS if its FY 2026 wage
index were equal to 0.6859, which is 90.25 percent of 0.7600, its FY
2024 wage index.
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\206\ Under the wage index cap policy at 42 CFR 412.64(h)(7), a
hospital's wage index for a FY cannot be lower than 0.95 * its wage
index from the prior FY. Over a 2-year period if its wage index were
decreasing by more than 5 percent each year, this would mean a
hospital's wage index for a FY cannot be lower than (0.95*0.95)
times its wage index from two years earlier. Similarly for our
proposed FY 2026 transitional exception policy, we are proposing
that a hospital is significantly impacted by the discontinuation of
the low wage index hospital policy if its FY 2026 wage index is less
than (0.95*0.95) of its FY 2024 wage index, which equates to a
decrease of more than 9.75 percent.
\207\ 90.25 percent = 95 percent for FY 2025 * 95 percent for FY
2026.
\208\ We note that we are not proposing to change the FY 2026
wage index values under section 1886(d)(3)(E) for hospitals eligible
for the proposed FY 2026 transitional exception policy on the basis
of the exception; the proposed change would be applied as a separate
step only for purposes of determining the hospitals' FY 2026 IPPS
payments.
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Under the capital IPPS, the adjustment for local cost variation is
based on the hospital wage index value that is applicable to the
hospital under the operating IPPS. We adjust the capital standard
Federal rate so that the effects of the annual changes in the
geographic adjustment factor (GAF) are budget neutral. The low wage
index hospital policy has been reflected in the capital IPPS GAFs since
FY 2020 (84 FR 42638). The removal of the low wage index hospital
policy for FY 2025 also affects the FY 2025 GAFs. Because we are now no
longer applying the low wage index hospital policy in FY 2025, we are
also no longer making an adjustment to the FY 2025 capital standard
Federal rate to ensure budget neutrality for the low wage index
hospital policy.
As discussed previously, for FY 2025 we believe it is appropriate
to establish a transition policy for low wage hospitals significantly
impacted by the removal of the low wage index hospital policy.
As discussed in the FY 2025 IFC (89 FR 80408), since FY 2023, the
GAFs reflect the wage index cap policy that limits any decrease to a
hospital's wage index from its wage index in the prior FY, regardless
of the circumstances causing the decline, to 95 percent of its prior
year value. As described previously, some hospitals that previously
benefitted from the low wage index hospital policy would experience
decreases of 10 percent or more over the two years from their FY 2024
wage index (with the low wage index hospital policy applied) to their
proposed FY 2026 wage index (that is, approximately 5 percent or more
per year over that time period). As such, similar to the FY 2025
interim transition policy established in the FY 2025 IFC, we are
proposing to make a budget neutral
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equivalent exception under the capital IPPS.
G. FY 2026 Wage Index Tables
In this FY 2026 IPPS/LTCH PPS proposed rule, we have included the
following wage index tables: Table 2 titled ``Case-Mix Index and Wage
Index Table by CCN''; Table 3 titled ``Wage Index Table by CBSA'';
Table 4A titled ``List of Counties Eligible for the Out-Migration
Adjustment under Section 1886(d)(13) of the Act''; and Table 4B titled
``Counties redesignated under section 1886(d)(8)(B) of the Act (Lugar
Counties).'' We refer readers to section VI. of the Addendum to this
proposed rule for a discussion of the wage index tables for FY 2026.
H. Proposed Labor-Related Share for the FY 2026 Wage Index
Section 1886(d)(3)(E) of the Act directs the Secretary to adjust
the proportion of the national prospective payment system base payment
rates that are attributable to wages and wage-related costs by a factor
that reflects the relative differences in labor costs among geographic
areas. It also directs the Secretary to estimate from time to time the
proportion of hospital costs that are labor-related and to adjust the
proportion (as estimated by the Secretary from time to time) of
hospitals' costs that are attributable to wages and wage-related costs
of the DRG prospective payment rates. We refer to the portion of
hospital costs attributable to wages and wage-related costs as the
labor-related share. The labor-related share of the prospective payment
rate is adjusted by an index of relative labor costs, which is referred
to as the wage index.
Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of
the Act to provide that the Secretary must employ 62 percent as the
labor-related share unless this would result in lower payments to a
hospital than would otherwise be made. However, this provision of
Public Law 108-173 did not change the legal requirement that the
Secretary estimate from time to time the proportion of hospitals' costs
that are attributable to wages and wage-related costs. Thus, hospitals
receive payment based on either a 62-percent labor-related share, or
the labor-related share estimated from time to time by the Secretary,
depending on which labor-related share results in a higher payment.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45194 through
45208), we rebased and revised the hospital market basket to a 2018-
based IPPS hospital market basket, which replaced the 2014-based IPPS
hospital market basket, effective beginning October 1, 2021. Using the
2018-based IPPS market basket, we finalized a labor-related share of
67.6 percent for discharges occurring on or after October 1, 2021. In
addition, in FY 2022, we implemented this revised and rebased labor-
related share in a budget neutral manner (86 FR 45193, 86 FR 45529
through 45530). However, consistent with section 1886(d)(3)(E) of the
Act, we did not take into account the additional payments that would be
made as a result of hospitals with a wage index less than or equal to
1.0000 being paid using a labor-related share lower than the labor-
related share of hospitals with a wage index greater than 1.0000.
As described in section IV. of the preamble of this proposed rule,
effective beginning FY 2026, we are proposing to rebase and revise the
IPPS market basket to reflect a 2023 base year. We also are proposing
to recalculate the labor-related share for discharges occurring on or
after October 1, 2025, using the proposed 2023-based IPPS market
basket. As discussed in Appendix A of this proposed rule, we are
proposing this rebased and revised labor-related share in a budget
neutral manner. However, consistent with section 1886(d)(3)(E) of the
Act, we would not take into account the additional payments that would
be made as a result of hospitals with a wage index less than or equal
to 1.0000 being paid using a labor-related share lower than the labor-
related share of hospitals with a wage index greater than 1.0000.
The labor-related share is used to determine the proportion of the
national IPPS base payment rate to which the area wage index is
applied. We include a cost category in the labor-related share if the
costs are labor intensive and vary with the local labor market. As
described in section IV. of the preamble of this proposed rule,
beginning with FY 2026, we are proposing to include in the labor-
related share the national average proportion of operating costs that
are attributable to the following cost categories in the 2023-based
IPPS market basket: Wages and Salaries; Employee Benefits; Professional
Fees: Labor-Related; Administrative and Facilities Support Services;
Installation, Maintenance, and Repair Services; and All Other: Labor-
Related Services as measured in the proposed 2023-based IPPS market
basket. Therefore, for FY 2026, we are proposing to use a labor-related
share of 66.0 percent for discharges occurring on or after October 1,
2025.
As discussed in section V.B. of the preamble of this proposed rule,
prior to January 1, 2016, Puerto Rico hospitals were paid based on 75
percent of the national standardized amount and 25 percent of the
Puerto Rico-specific standardized amount. As a result, we applied the
Puerto Rico-specific labor-related share percentage and nonlabor-
related share percentage to the Puerto Rico-specific standardized
amount. Section 601 of the Consolidated Appropriations Act, 2016 (Pub.
L. 114-113) amended section 1886(d)(9)(E) of the Act to specify that
the payment calculation with respect to operating costs of inpatient
hospital services of a subsection (d) Puerto Rico hospital for
inpatient hospital discharges on or after January 1, 2016, shall use
100 percent of the national standardized amount. Because Puerto Rico
hospitals are no longer paid with a Puerto Rico-specific standardized
amount as of January 1, 2016, under section 1886(d)(9)(E) of the Act as
amended by section 601 of the Consolidated Appropriations Act, 2016,
there is no longer a need for us to calculate a Puerto Rico-specific
labor-related share percentage and nonlabor-related share percentage
for application to the Puerto Rico-specific standardized amount.
Hospitals in Puerto Rico are now paid 100 percent of the national
standardized amount and, therefore, are subject to the national labor-
related share and nonlabor-related share percentages that are applied
to the national standardized amount. Accordingly, for FY 2026, we are
not proposing a Puerto Rico-specific labor-related share percentage or
a nonlabor-related share percentage.
Tables 1A and 1B, which are published in section VI. of the
Addendum to this FY 2026 IPPS/LTCH PPS proposed rule and available via
the internet on the CMS website, reflect the national labor-related
share. Table 1C, in section VI. of the Addendum to this FY 2026 IPPS/
LTCH PPS proposed rule and available via the internet on the CMS
website, reflects the national labor-related share for hospitals
located in Puerto Rico. For FY 2026, for all IPPS hospitals (including
Puerto Rico hospitals) whose wage indexes are less than or equal to
1.0000, we are proposing to apply the wage index to a labor-related
share of 62 percent of the national standardized amount. For all IPPS
hospitals (including Puerto Rico hospitals) whose wage indexes are
greater than 1.000, for FY 2026, we are proposing to apply the wage
index to a labor-related share of 66.0 percent of the national
standardized amount.
[[Page 18237]]
IV. Rebasing and Revising of the Hospital Market Baskets for Acute Care
Hospitals
A. Background
Effective for cost reporting periods beginning on or after July 1,
1979, we developed and adopted a hospital input price index (that is,
the hospital market basket for operating costs). Although ``market
basket'' technically describes the mix of goods and services used in
providing hospital care, this term is also commonly used to denote the
input price index (that is, cost category weights and price proxies
combined) derived from that market basket. Accordingly, the term
``market basket'' as used in this document refers to the hospital input
price index.
The percentage change in the market basket reflects the average
change in the price of goods and services hospitals purchase in order
to provide inpatient care. We first used the market basket to adjust
hospital cost limits by an amount that reflected the average increase
in the prices of the goods and services used to provide hospital
inpatient care. This approach linked the increase in the cost limits to
the efficient utilization of resources.
Since the inception of the IPPS, the projected change in the
hospital market basket has been the integral component of the update
factor by which the prospective payment rates are updated every year.
An explanation of the hospital market basket used to develop the
prospective payment rates was published in the Federal Register on
September 1, 1983 (48 FR 39764). We also refer readers to the FY 2022
IPPS/LTCH PPS final rule (86 FR 45194 through 45207) in which we
discussed the most recent previous rebasing of the hospital input price
index.
The hospital market basket is a fixed-weight, Laspeyres-type price
index. A Laspeyres-type price index measures the change in price, over
time, of the same mix of goods and services purchased in the base
period. Any changes in the quantity or mix of goods and services (that
is, intensity) purchased over time relative to the base period are not
measured.
The index itself is constructed in three steps. First, a base
period is selected (in this proposed rule, we propose to use 2023 as
the base period) and total base period costs are estimated for a set of
mutually exclusive and exhaustive spending categories, with the
proportion of total costs that each category represents being
calculated. These proportions are called cost weights. Second, each
cost category is matched to an appropriate price or wage variable,
referred to as a ``price proxy.'' In almost every instance, these price
proxies are derived from publicly available statistical series that are
published on a consistent schedule (preferably at least on a quarterly
basis). Finally, the cost weight for each cost category is multiplied
by the level of its respective price proxy. The sum of these products
(that is, the cost weights multiplied by their price index levels) for
all cost categories yields the composite index level of the market
basket in a given period. Repeating this step for other periods
produces a series of market basket levels over time. Dividing an index
level for a given period by an index level for an earlier period
produces a rate of growth in the input price index over that timeframe.
As previously noted, the market basket is described as a fixed-
weight index because it represents the change in price over time of a
constant mix (quantity and intensity) of goods and services needed to
provide hospital services. The effects on total costs resulting from
changes in the mix of goods and services purchased subsequent to the
base period are not measured. For example, a hospital hiring more
nurses to accommodate the needs of patients would increase the volume
of goods and services purchased by the hospital but would not be
factored into the price change measured by a fixed-weight hospital
market basket. Only when the index is rebased would changes in the
quantity and intensity be captured, with those changes being reflected
in the cost weights. Therefore, we rebase the market basket
periodically so that the cost weights reflect recent changes in the mix
of goods and services that hospitals purchase (hospital inputs) to
furnish inpatient care between base periods.
We last rebased the hospital market basket cost weights effective
for FY 2022 (86 FR 45194 through 45207), with 2018 data used as the
base period for the construction of the market basket cost weights. For
this FY 2026 IPPS/LTCH PPS proposed rule, we propose to rebase the IPPS
operating market basket to reflect the 2023 cost structure for IPPS
hospitals and to revise applicable cost categories and price proxies
used to determine the IPPS market basket, as discussed in this proposed
rule. We also propose to rebase and revise the Capital Input Price
Index (CIPI) as described in section IV.D. of the preamble of this
proposed rule.
In the following section, we provide an overview of the proposed
IPPS market basket, describe the proposed methodologies for developing
the cost weights, and provide information on the proposed price
proxies. Then, we present the proposed FY 2026 market basket update and
labor-related share based on the proposed 2023-based IPPS market
basket.
B. Rebasing and Revising the IPPS Market Basket
The terms ``rebasing'' and ``revising,'' while often used
interchangeably, actually denote different activities. ``Rebasing''
means moving the base year for the structure of costs of an input price
index (for example, in this proposed rule, we propose to shift the base
year cost structure for the IPPS hospital index from 2018 to 2023).
``Revising'' means changing data sources or price proxies used in the
input price index. As published in the FY 2006 IPPS final rule (70 FR
47403), in accordance with section 404 of Public Law 108-173, CMS
determined a new frequency for rebasing the hospital market basket. We
established a rebasing frequency of every 4 years and, therefore, we
propose to rebase and revise the IPPS market basket effective for the
FY 2026 IPPS update since it was last rebased effective for the FY 2022
IPPS update (the base year for the cost weights is being updated from
2018 to 2023). We invite public comments on our proposed methodology
discussed in this section of this proposed rule, for deriving the
proposed 2023-based IPPS market basket.
1. Development of Cost Categories and Weights
a. Use of Medicare Cost Report Data
The major source of expenditure data for developing the proposed
rebased and revised hospital market basket cost weights is the 2023
Medicare cost reports. These 2023 Medicare cost reports are for cost
reporting periods beginning on and after October 1, 2022, and before
October 1, 2023. We propose to use 2023 as the base year because we
believe that the 2023 Medicare cost reports represent the most recent,
complete set of Medicare cost report data available to develop cost
weights for IPPS hospitals at the time of rulemaking. As was done in
previous rebasings, these cost reports are from IPPS hospitals only
(hospitals excluded from the IPPS (including CAHs and rural emergency
hospitals) are not included) and are based on IPPS Medicare-allowable
operating costs. IPPS Medicare-allowable operating costs are costs that
are eligible to be paid under the IPPS. For example, the IPPS market
basket excludes home health agency (HHA) costs as these costs would
[[Page 18238]]
be paid under the HHA PPS and, therefore, these costs are not IPPS
Medicare-allowable costs.
The current set of instructions for the Medicare cost reports for
hospitals (Form 2552-10, OMB Control Number 0938-0050) can be found in
Chapter 40 at the following website (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935).
The major types of costs underlying the proposed 2023-based IPPS
market basket are derived from the Medicare cost reports (Form 2552-10,
OMB Control Number 0938-0050). Specifically, we propose to use the
Medicare cost reports for seven specific types of costs: Wages and
Salaries, Employee Benefits, Contract Labor, Pharmaceuticals,
Professional Liability Insurance (Malpractice), Blood and Blood
Products, and Home Office/Related Organization Contract Labor. A
residual category is then estimated and reflects all remaining costs
not captured in the seven types of costs identified previously. The
2018-based IPPS market basket similarly used the Medicare cost reports.
In order to create a market basket that is representative of IPPS
hospitals serving Medicare patients and to help ensure the major cost
weights accurately reflect the percent of total Medicare-allowable
operating costs, as defined in this proposed rule, we propose to apply
edits to remove reporting errors and outliers. Specifically, the IPPS
Medicare cost reports used to calculate the market basket cost weights
exclude any providers that reported costs less than or equal to zero
for the following categories: total Medicare inpatient costs (Worksheet
D-1, Part II, column 1, line 49); Medicare PPS payments (Worksheet E,
Part A, column 1, line 59); Total salary costs (Worksheet S-3, Part II,
column 2, line 1). We also limited our sample to providers that had a
Medicare cost reporting period that was between 10 and 14 months. The
final sample used includes roughly 2,900 Medicare cost reports (about
93 percent of the universe of IPPS Medicare cost reports for 2023). The
sample of providers is representative of the national universe of
providers by ownership-type (proprietary, nonprofit, and government)
and by urban/rural status.
In this proposed rule, we calculate total Medicare-allowable
operating costs for each hospital to be equal to noncapital costs
(Worksheet B, Part I, column 26 less Worksheet B, Part II, column 26)
that are attributable to the Medicare-allowable cost centers of the
hospital. We propose that Medicare-allowable cost centers are lines 30
through 35, 50 through 60, 62 through 76, 90, 91, 92.01, 93, 96 and 97.
This is the same methodology that was used for the 2018-based IPPS
market basket.
(1) Wages and Salaries Costs
To derive wages and salaries costs for the Medicare-allowable cost
centers, we propose to first calculate total unadjusted wages and
salaries costs as reported on Worksheet S-3, Part II, column 4, line 1.
We then propose to remove the wages and salaries attributable to non-
Medicare-allowable cost centers (that is, excluded areas) as well as a
portion of overhead wages and salaries attributable to these excluded
areas. This is the same methodology that was used to derive wages and
salaries costs for the 2018-based IPPS market basket.
Specifically, we propose to calculate excluded area wages and
salaries as equal to the sum of Worksheet S-3, Part II, column 4, lines
3, 4.01, 5, 6, 7, 7.01, 8, 9, and 10 less Worksheet A, column 1, lines
20 and 23. Overhead wages and salaries are attributable to the entire
IPPS facility. Therefore, we propose to only include the proportion
attributable to the Medicare-allowable cost centers. Specifically, we
propose to estimate the proportion of overhead wages and salaries that
are not attributable to Medicare-allowable cost centers (that is,
excluded areas) by first calculating the ratio of total Medicare-
allowable operating costs (as previously defined) to total facility
operating costs (Worksheet B, Part I, column 26, line 202 less
Worksheet B, Part I, column 0, lines 1 and 2). We then propose to
multiply this ratio by total overhead wages and salaries (Worksheet S-
3, Part II, column 4, lines 26, 27, 29 through 32, 34, and 36 through
43) to estimate Medicare allowable overhead wages and salaries. The
difference between total overhead wages and salaries and Medicare
allowable overhead wages and salaries is equal to the overhead wages
and salaries attributable to the excluded areas.
Therefore, we propose wages and salaries costs used for the 2023-
based IPPS market basket are equal to total wages and salaries costs
less: (a) excluded area wages and salaries costs; and (b) overhead
wages and salaries costs attributable to the excluded areas.
(2) Employee Benefits Costs
We propose to derive employee benefits costs using a similar
methodology as the wages and salaries costs; that is, reflecting
employee benefits costs attributable to the Medicare-allowable cost
centers. First, we calculate total unadjusted employee benefits costs
as the sum of Worksheet S-3, Part II, column 4, lines 17, 18, 20, 22,
and 25.52.
We then exclude those employee benefits attributable to the
overhead wages and salaries for the non-Medicare-allowable cost centers
(that is, excluded areas). Employee benefits attributable to the non-
Medicare-allowable cost centers are derived by multiplying the ratio of
total employee benefits (equal to the sum of Worksheet S-3, Part II,
column 4, lines 17, 18, 19, 20, 21, 22, 22.01, 23, 24, 25, 25.50,
25.51, 25.52, and 25.53) to total wages and salaries (Worksheet S-3,
Part II, column 4, line 1) (which we hereafter refer to as the ``IPPS
benefits ratio'') by excluded overhead wages and salaries (as
previously described in section IV.B.1.a.(1) of the preamble of this
proposed rule for wages and salaries costs). The same methodology was
used in the 2018-based IPPS market basket.
Therefore, we propose employee benefit costs used for the 2023-
based IPPS market basket are equal to total employee benefit costs
less: (a) excluded area benefit costs; and (b) overhead benefit costs
attributable to the excluded areas.
(3) Contract Labor Costs
Contract labor costs are primarily associated with direct patient
care services. Contract labor costs for services such as accounting,
billing, and legal are estimated using other government data sources as
described in this proposed rule. We propose to derive contract labor
costs for the 2023-based IPPS market basket as the sum of Worksheet S-
3, Part II, column 4, lines 11, 13, and 15. The same methodology was
used in the 2018-based IPPS market basket.
(4) Professional Liability Insurance Costs
We propose that professional liability insurance (PLI) costs (often
referred to as malpractice costs) be equal to premiums, paid losses,
and self-insurance costs reported on Worksheet S-2, Part I, columns 1
through 3, line 118.01. The same methodology was used for the 2018-
based IPPS market basket.
(5) Pharmaceuticals Costs
We propose to calculate pharmaceuticals costs as total costs
reported for the Pharmacy cost center (Worksheet B, Part I, column 0,
line 15) and Drugs Charged to Patients cost center (Worksheet B, Part
I, column 0, line 73) less wages and salaries attributable to these two
cost centers
[[Page 18239]]
(Worksheet S-3, Part II, column 4, line 40 and Worksheet A, column 1,
line 73) less estimated employee benefits attributable to these two
cost centers. We propose to estimate the employee benefits costs by
multiplying the IPPS benefits ratio as described in section
IV.B.1.a.(2) of the preamble of this proposed rule by total wages and
salaries costs for the Pharmacy and Drugs Charged to Patients cost
centers (equal to the sum of Worksheet S-3, Part II, column 4, line 40
and Worksheet A, column 1, line 73). The same methodology was used for
the 2018-based IPPS market basket.
(6) Blood and Blood Products Costs
We propose to calculate blood and blood products costs as total
costs reported for the Whole Blood & Packed Red Blood Cells cost center
(Worksheet B, Part I, column 0, line 62) and the Blood Storing,
Processing, & Transfusing cost center (Worksheet B, Part I, column 0,
line 63) less wages and salaries attributable to these two cost centers
(Worksheet A, column 1, lines 62 and 63) less estimated employee
benefits attributable to these two cost centers. We estimate these
employee benefits costs by multiplying the IPPS benefits ratio as
described in section IV.B.1.a.(2) of the preamble of this proposed rule
by total wages and salaries for the Whole Blood & Packed Red Blood
Cells and Blood Storing, Processing, & Transfusing cost centers (equal
to the sum of Worksheet A, column 1, lines 62 and 63). The same
methodology was used for the 2018-based IPPS market basket.
(7) Home Office/Related Organization Contract Labor Costs
We propose to determine home office/related organization contract
labor costs using data reported on Worksheet S-3, Part II, column 4,
lines 14.01, 14.02, 25.50, and 25.51. The same methodology was used for
the 2018-based IPPS market basket.
b. Final Major Cost Category Computation
After we derived costs for the major cost categories for each
provider using the Medicare cost report data as previously described,
we propose to address data outliers using the following steps.
First, for each of the major cost weights except the Home Office/
Related Organization Contract Labor cost weight, we propose to trim the
data to remove outliers (a standard statistical process) by: (step 1)
requiring that major expenses (such as Wages and Salaries costs) and
total Medicare-allowable operating costs be greater than zero; (step 2)
dividing the costs for each of the six categories (calculated as
previously described in this section) by total Medicare-allowable
operating costs to obtain cost weights for each PPS hospital; and (step
3) excluding the top and bottom five percent of the major cost weight
(for example, Wages and Salaries costs as a percent of total Medicare-
allowable operating costs). We note that missing values are assumed to
be zero consistent with the methodology for how missing values were
treated in the 2018-based IPPS market basket.
For the Home Office/Related Organization Contract Labor cost
weight, we propose to exclude outliers using a slightly different
method by (step 1) requiring that total Medicare-allowable operating
costs are greater than zero; (step 2) dividing the home office/related
organization contract labor costs (calculated as previously described
in this section) by total Medicare-allowable operating costs to obtain
a cost weight for each PPS hospital; and (step 3) applying a trim that
excludes those reporters with a Home Office/Related Organization
Contract Labor cost weight above the 99th percentile. This allows all
providers' Medicare-allowable costs to be included, even if their home
office/related organization contract labor costs were reported to be
zero. The Medicare cost report data (Worksheet S-2, Part I, line 140)
indicate that not all hospitals have a home office. IPPS hospitals
without a home office would report administrative costs that might
typically be associated with a home office in the Wages and Salaries
and Employee Benefits cost weights, or these costs would be reflected
in the residual cost weight if they purchased these types of services
from external contractors. We believe the trimming methodology that
excludes those who report a Home Office/Related Organization Contract
Labor cost weight above the 99th percentile is appropriate as it
removes extreme outliers while also allowing providers with zero home
office/related organization contract labor costs to be included in the
Home Office/Related Organization Contract Labor cost weight
calculation.
After the outliers have been removed, we sum the costs for each
category across all remaining providers. We then divide this by the sum
of total Medicare-allowable operating costs across all remaining
providers to obtain a cost weight for the proposed 2023-based IPPS
market basket for the given category. This is the same methodology used
for the 2018-based IPPS market basket.
The trimming process is done individually for each cost category so
that providers excluded from one cost weight calculation are not
automatically excluded from another cost weight calculation. We note
that these proposed trimming methods are the same types of edits
performed for the 2018-based IPPS market basket, as well as other PPS
market baskets (including but not limited to SNF market basket and home
health market basket). We note that for each of the cost weights we
evaluated the distribution of providers and costs by ownership-type,
and by urban/rural status. For all of the cost weights, the trimmed
sample was nationally representative.
Finally, we calculate the residual ``All Other'' cost weight that
reflects all remaining costs that are not captured in the seven cost
categories listed. Table IV-01 shows the major cost categories and
their respective cost weights as derived from the Medicare cost
reports.
Table IV-01--Major Cost Categories as Derived From the Medicare Cost
Reports
------------------------------------------------------------------------
Proposed 2023-
Major cost categories 2018-based IPPS based IPPS market
market basket basket
------------------------------------------------------------------------
Wages and Salaries................ 39.7 37.8
Employee Benefits................. 11.3 9.8
Contract Labor.................... 2.0 3.6
Professional Liability Insurance 1.0 1.0
(Malpractice)....................
Pharmaceuticals................... 7.1 7.4
Blood and Blood Products.......... 0.6 0.5
Home Office/Related Organization 5.9 6.7
Contract Labor...................
[[Page 18240]]
All Other......................... 32.4 33.2
------------------------------------------------------------------------
From 2018 to 2023, the Wages and Salaries and Employee Benefits
cost weights as calculated directly from the Medicare cost reports
decreased by 1.9 percentage points and 1.5 percentage points,
respectively, while the Contract Labor cost weight increased by 1.6
percentage points.
As we did for the 2018-based IPPS market basket (86 FR 45198), we
propose to allocate contract labor costs to the Wages and Salaries and
Employee Benefits cost weights based on their relative proportions for
employed labor under the assumption that contract labor costs are
comprised of both wages and salaries and employee benefits. The
contract labor allocation proportion for wages and salaries is equal to
the Wages and Salaries cost weight as a percent of the sum of the Wages
and Salaries cost weight and the Employee Benefits cost weight. Using
the 2023 Medicare cost report data, this percentage is 79 percent.
Therefore, we propose to allocate approximately 79 percent of the
Contract Labor cost weight to the Wages and Salaries cost weight and 21
percent to the Employee Benefits cost weight. The 2018-based IPPS
market basket allocated 78 percent of the Contract Labor cost weight to
the Wages and Salaries cost weight.
Table IV-02 shows the Wages and Salaries and Employee Benefits cost
weights after contract labor allocation for the 2018-based IPPS market
basket and the proposed 2023-based IPPS market basket. In aggregate,
the Compensation cost weight (calculated using more detailed decimal
places) decreased from 53.0 percent to 51.1 percent, or 1.9 percentage
points.
Table IV-02--Wages and Salaries and Employee Benefits Cost Weights After
Contract Labor Allocation
------------------------------------------------------------------------
Proposed 2023-
Major cost categories 2018-based IPPS based IPPS market
market basket basket
------------------------------------------------------------------------
Total Compensation................ 53.0 51.1
Wages and Salaries................ 41.2 40.6
Employee Benefits................. 11.7 10.5
------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
c. Derivation of the Detailed Cost Weights
To further divide the ``All Other'' residual cost weight estimated
from the 2023 Medicare cost report data into more detailed cost
categories, we propose to use the 2017 Benchmark I-O, ``The Use Table
(Supply-Use Framework),'' for NAICS 622000, Hospitals, published by the
Bureau of Economic Analysis (BEA). These data are publicly available at
the following website: https://www.bea.gov/industry/input-output-accounts-data. The BEA Benchmark I-O data are generally scheduled for
publication every 5 years on a lagged basis, with the most recent data
available for 2017. The 2017 Benchmark I-O data are derived from the
2017 Economic Census and are the building blocks for BEA's economic
accounts. Therefore, they represent the most comprehensive and complete
set of data on the economic processes or mechanisms by which output is
produced and distributed.\209\ BEA also produces Annual I-O estimates.
However, while based on a similar methodology, these estimates reflect
less comprehensive and less detailed data sources and are subject to
revision when benchmark data become available. Instead of using the
less detailed Annual I-O data, we propose to inflate the detailed 2017
Benchmark I-O data forward to 2023 by applying the annual price changes
from the respective price proxies to the appropriate market basket cost
categories that are obtained from the 2017 Benchmark I-O data and
calculated the cost shares that each cost category represents using the
inflated data. These resulting 2023 cost shares were applied to the
residual ``All Other'' cost weight to obtain the detailed cost weights
for the proposed 2023-based IPPS market basket. For example, the cost
for Food: Direct Purchases represents 4.0 percent of the sum of the
residual ``All Other'' 2017 Benchmark I-O Hospital Expenditures
inflated to 2023. Therefore, the Food: Direct Purchases cost weight
represents 4.0 percent of the proposed 2023-based IPPS market basket's
``All Other'' cost category (33.2 percent), yielding a Food: Direct
Purchases proposed cost weight of 1.3 percent in the proposed 2023-
based IPPS market basket (0.040 x 33.2 percent = 1.3 percent). For the
2018-based IPPS market basket (86 FR 45198), we used the same
methodology utilizing the 2012 Benchmark I-O data (aged to 2018).
---------------------------------------------------------------------------
\209\ https://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------
Using this methodology, we propose to derive 17 detailed cost
categories from the proposed 2023-based IPPS market basket residual
cost weight (33.2 percent). These categories are: (1) Fuel: Oil and
Gas; (2) Electricity and Other Non-Fuel Utilities; (3) Food: Direct
Purchases; (4) Food: Contract Services; (5) Chemicals; (6) Medical
Instruments; (7) Rubber and Plastics; (8) Paper and Printing Products;
(9) Miscellaneous Products; (10) Professional Fees: Labor-Related; (11)
Administrative and Facilities Support Services; (12) Installation,
Maintenance, and Repair Services; (13) All Other: Labor-Related
Services; (14) Professional Fees: Nonlabor-Related; (15) Financial
Services; (16) Telephone Services; and (17) All Other: Nonlabor-Related
Services. We note that these are the same categories that were used in
the 2018-based IPPS market basket.
2. Selection of Proposed Price Proxies
After computing the proposed 2023 cost weights for the IPPS market
basket, it was necessary to select appropriate wage and price proxies
to reflect the rate of price change for each expenditure category. With
the exception of the
[[Page 18241]]
proxy for professional liability insurance (PLI), all the proxies we
are proposing are based on Bureau of Labor Statistics (BLS) data and
are grouped into one of the following BLS categories:
Producer Price Indexes--Producer Price Indexes (PPIs)
measure the average change over time in the selling prices received by
domestic producers for their output. The prices included in the PPI are
from the first commercial transaction for many products and some
services (https://www.bls.gov/ppi/).
Consumer Price Indexes--Consumer Price Indexes (CPIs)
measure the average change over time in the prices paid by urban
consumers for a market basket of consumer goods and services (https://www.bls.gov/cpi/). CPIs are only used when the purchases are similar to
those of retail consumers rather than purchases at the producer level,
or if no appropriate PPIs are available.
Employment Cost Indexes--Employment Cost Indexes (ECIs)
measure the rate of change in employee wage rates and employer costs
for employee benefits per hour worked. These indexes are fixed-weight
indexes and strictly measure the change in wage rates and employee
benefits per hour. ECIs are superior to Average Hourly Earnings (AHE)
as price proxies for input price indexes because they are not affected
by shifts in occupation or industry mix, and because they measure pure
price change and are available by both occupational group and by
industry. The industry ECIs are based on the NAICS and the occupational
ECIs are based on the Standard Occupational Classification System
(SOC).
We evaluated the price proxies using the criteria of reliability,
timeliness, availability, and relevance:
Reliability. Reliability indicates that the index is based
on valid statistical methods and has low sampling variability. Widely
accepted statistical methods ensure that the data were collected and
aggregated in a way that can be replicated. Low sampling variability is
desirable because it indicates that the sample reflects the typical
members of the population. (Sampling variability is variation that
occurs by chance because only a sample was surveyed rather than the
entire population.)
Timeliness. Timeliness implies that the proxy is published
regularly, preferably at least once a quarter. The market basket levels
are updated quarterly, and therefore, it is important for the
underlying price proxies to be up-to-date, reflecting the most recent
data available. We believe that using proxies that are published
regularly (at least quarterly, whenever possible) helps to ensure that
we are using the most recent data available to update the market
basket. We strive to use publications that are disseminated frequently,
because we believe that this is an optimal way to stay abreast of the
most current data available.
Availability. Availability means that the proxy is
publicly available. We prefer that our proxies are publicly available
because this will help ensure that our market basket updates are as
transparent to the public as possible. In addition, this enables the
public to be able to obtain the price proxy data on a regular basis.
Relevance. Relevance means that the proxy is applicable
and representative of the cost category weight to which it is applied.
We believe the proposed PPIs, CPIs, and ECIs selected meet these
criteria. Therefore, we believe that they continue to be the best proxy
of price changes for the cost categories to which they would be
applied.
In this proposed rule, we present a detailed explanation of the
price proxies that we propose for each cost category weight.
a. Wages and Salaries
We propose to use the ECI for Wages and Salaries for All Civilian
Workers in Hospitals (BLS series code CIU1026220000000I) to proxy the
price growth of this cost category. This is the same price proxy used
in the 2018-based IPPS market basket.
b. Employee Benefits
We propose to use the ECI for Total Benefits for All Civilian
Workers in Hospitals to proxy the price growth of this cost category.
This ECI is calculated using the ECI for Total Compensation for All
Civilian Workers in Hospitals (BLS series code CIU1016220000000I) and
the relative importance of wages and salaries within total
compensation. This is the same price proxy used in the 2018-based IPPS
market basket.
c. Fuel: Oil and Gas
For the proposed 2023-based IPPS market basket, we propose to use a
blend of the PPI Industry for Petroleum Refineries (NAICS 3241), PPI
for Other Petroleum and Coal Products (NAICS 32419) and the PPI
Commodity for Natural Gas. Our analysis of the Bureau of Economic
Analysis' 2017 Benchmark I-O data for NAICS 622000 Hospitals shows that
Petroleum Refineries expenses account for approximately 86 percent,
Other Petroleum and Coal Products expenses account for about 7 percent
and Natural Gas expenses account for approximately 7 percent of
Hospitals' (NAICS 622000) total Fuel: Oil and Gas expenses. Therefore,
we propose to use a blend of 86 percent of the PPI Industry for
Petroleum Refineries (BLS series code PCU324110324110), 7 percent of
the PPI for Other Petroleum and Coal Products (BLS series code
PCU32419) and 7 percent of the PPI Commodity Index for Natural Gas (BLS
series code WPU0531) as the price proxy for this cost category. The
2018-based IPPS market basket used a 90/10 blend of the PPI Industry
for Petroleum Refineries and PPI Commodity for Natural Gas, reflecting
the 2012 I-O data (86 FR 45199). We believe that the three proposed
price proxies are the most technically appropriate indices available to
proxy the price growth of the Fuel: Oil and Gas cost category in the
proposed 2023-based IPPS market basket.
d. Electricity and Other Non-Fuel Utilities
We propose to use the PPI Commodity for Commercial Electric Power
(BLS series code WPU0542) to proxy the price growth of this cost
category. This is the same price proxy used in the 2018-based IPPS
market basket.
e. Professional Liability Insurance
We propose to proxy price changes in hospital professional
liability insurance premiums (PLI) using percentage changes as
estimated by the CMS Hospital Professional Liability Index. To generate
these estimates, we collect commercial insurance medical liability
premiums for a fixed level of coverage while holding nonprice factors
constant (such as a change in the level of coverage). This is the same
price proxy used in the 2018-based IPPS market basket.
f. Pharmaceuticals
We propose to use the PPI Commodity for Pharmaceuticals for Human
Use, Prescription (BLS series code WPUSI07003) to proxy the price
growth of this cost category. This is the same price proxy used in the
2018-based IPPS market basket.
g. Food: Direct Purchases
We propose to use the PPI Commodity for Processed Foods and Feeds
(BLS series code WPU02) to proxy the price growth of this cost
category. This is the same price proxy used in the 2018-based IPPS
market basket.
h. Food: Contract Services
We propose to use the CPI for Food Away From Home (All Urban
Consumers) (BLS series code
[[Page 18242]]
CUUR0000SEFV) to proxy the price growth of this cost category. This is
the same price proxy used in the 2018-based IPPS market basket.
i. Chemicals
Similar to the 2018-based IPPS market basket, we propose to use a
four-part blended PPI as the proxy for the Chemicals cost category in
the proposed 2023-based IPPS market basket. The proposed blend is
composed of the PPI Industry for Industrial Gas Manufacturing, Primary
Products (BLS series code PCU325120325120P), the PPI Industry for Other
Basic Inorganic Chemical Manufacturing (BLS series code PCU32518-
32518), the PPI Industry for Other Basic Organic Chemical Manufacturing
(BLS series code PCU32519-32519), and the PPI Industry for Other
Miscellaneous Chemical Product Manufacturing (BLS series code
PCU325998325998). For the proposed 2023-based IPPS market basket, we
propose to derive the weights for the PPIs using the 2017 Benchmark I-O
data. The 2018-based IPPS market basket used the 2012 Benchmark I-O
data to derive the weights for the four PPIs (86 FR 45200).
Table IV-03 shows the proposed weights for each of the four PPIs
used to create the blended index compared to those used for the 2018-
based IPPS market basket.
Table IV-03--Blended Chemical PPI Weights
----------------------------------------------------------------------------------------------------------------
2018-based Proposed 2023-
NAICS Name IPPS weights based IPPS
(%) weights (%)
----------------------------------------------------------------------------------------------------------------
325120................................. PPI Industry for Industrial Gas 19 26
Manufacturing.
325180................................. PPI Industry for Other Basic Inorganic 13 10
Chemical Manufacturing.
325190................................. PPI Industry for Other Basic Organic 60 49
Chemical Manufacturing.
325998................................. PPI Industry for Other Miscellaneous 8 15
Chemical Product Manufacturing.
----------------------------------------------------------------------------------------------------------------
j. Blood and Blood Products
We propose to use the PPI Industry for Blood and Organ Banks (BLS
series code PCU621991621991) to proxy the price growth of this cost
category. This is the same price proxy used in the 2018-based IPPS
market basket.
k. Medical Instruments
We propose to use a blended price proxy for the Medical Instruments
category, as shown in Table IV-04. The 2017 Benchmark I-O data shows
the majority of medical instruments and supply costs are for NAICS
339112--Surgical and medical instrument manufacturing costs
(approximately 64 percent) and NAICS 339113--Surgical appliance and
supplies manufacturing costs (approximately 36 percent). To proxy the
price changes associated with NAICS 339112, we propose using the PPI
Commodity for Surgical and medical instruments (BLS series code
WPU1562). To proxy the price changes associated with NAICS 339113, we
propose to use a 50/50 blend of the PPI Commodity for Medical and
surgical appliances and supplies (BLS series code WPU1563) and the PPI
Commodity for Miscellaneous products, Personal safety equipment and
clothing (BLS series code WPU1571). We propose to include the latter
price proxy as it would reflect personal protective equipment including
but not limited to face shields and protective clothing. The 2017
Benchmark I-O data does not provide specific expenses for these
products; however, we recognize that this category reflects costs faced
by IPPS hospitals. These are the same price proxies used in the 2018-
based IPPS market basket.
Table IV-04--Blended Medical Instruments PPI Weights
----------------------------------------------------------------------------------------------------------------
2018-based Proposed 2023-
NAICS Name IPPS weights based IPPS
(%) weights (%)
----------------------------------------------------------------------------------------------------------------
339112................................. PPI Commodity for Surgical and medical 56 64
instruments.
339113................................. PPI--Commodity for Medical and surgical 22 18
appliances and supplies.
PPI Commodity for Miscellaneous 22 18
products, Personal safety equipment
and clothing.
----------------------------------------------------------------------------------------------------------------
l. Rubber and Plastics
We propose to use the PPI Commodity for Rubber and Plastic Products
(BLS series code WPU07) to proxy the price growth of this cost
category. This is the same price proxy used in the 2018-based IPPS
market basket.
m. Paper and Printing Products
We propose to use a 61/39 blend of the PPI Commodity for
Publications Printed Matter and Printing Material (BLS Series Code
WPU094) and the PPI Commodity for Converted Paper and Paperboard
Products (BLS series code WPU0915) to proxy the price growth of this
cost category. The 2017 Benchmark I-O data shows that 61 percent of
paper and printing expenses are for Printing (NAICS 323110) and the
remaining expenses are for Paper manufacturing (NAICS 322). The 2018-
based IPPS market basket (86 FR 45201) used the PPI Commodity for
Converted Paper and Paperboard Products (BLS series code WPU0915) as
this comprised the majority of expenses as reported in the 2012
Benchmark I-O data.
n. Miscellaneous Products
We propose to use the PPI Commodity for Finished Goods Less Food
and Energy (BLS series code WPUFD4131) to proxy the price growth of
this cost category. This is the same price proxy used in the 2018-based
IPPS market basket.
o. Professional Fees: Labor-Related
We propose to use the ECI for Total Compensation for Private
Industry Workers in Professional and Related (BLS series code
CIU2010000120000I) to proxy the price growth of this category. It
includes occupations such as legal, accounting, and engineering
services. This is the same price proxy used in the 2018-based IPPS
market basket.
[[Page 18243]]
p. Administrative and Facilities Support Services
We propose to use the ECI for Total Compensation for Private
Industry Workers in Office and Administrative Support (BLS series code
CIU2010000220000I) to proxy the price growth of this category. This is
the same price proxy used in the 2018-based IPPS market basket.
q. Installation, Maintenance, and Repair Services
We propose to use the ECI for Total Compensation for All Civilian
Workers in Installation, Maintenance, and Repair (BLS series code
CIU1010000430000I) to proxy the price growth of this cost category.
This is the same proxy used in the 2018-based IPPS market basket.
r. All Other: Labor-Related Services
We propose to use the ECI for Total Compensation for Private
Industry Workers in Service Occupations (BLS series code
CIU2010000300000I) to proxy the price growth of this cost category.
This is the same price proxy used in the 2018-based IPPS market basket.
s. Professional Fees: Nonlabor-Related
We propose to use the ECI for Total Compensation for Private
Industry Workers in Professional and Related (BLS series code
CIU2010000120000I) to proxy the price growth of this category. This is
the same price proxy that we proposed to use for the Professional Fees:
Labor-Related cost category and the same price proxy used in the 2018-
based IPPS market basket.
t. Financial Services
We propose to use the ECI for Total Compensation for Private
Industry Workers in Financial Activities (BLS series code
CIU201520A000000I) to proxy the price growth of this cost category.
This is the same price proxy used in the 2018-based IPPS market basket.
u. Telephone Services
We propose to use the CPI for Telephone Services (BLS series code
CUUR0000SEED) to proxy the price growth of this cost category. This is
the same price proxy used in the 2018-based IPPS market basket.
v. All Other: Nonlabor-Related Services
We propose to use the CPI for All Items Less Food and Energy (BLS
series code CUUR0000SA0L1E) to proxy the price growth of this cost
category. We believe that using the CPI for All Items Less Food and
Energy avoids double counting of changes in food and energy prices as
they are already captured elsewhere in the market basket. This is the
same price proxy used in the 2018-based IPPS market basket.
Table IV-05 sets forth the proposed 2023-based IPPS market basket,
including the cost categories and their respective weights and price
proxies. For comparison purposes, the corresponding 2018-based IPPS
market basket cost weights also are listed.
Table IV-05--2023-Based IPPS Market Basket Cost Categories, Cost Weights, and Price Proxies Compared to 2018-
Based IPPS Market Basket Cost Weights
----------------------------------------------------------------------------------------------------------------
2018-based Proposed 2023-
IPPS market based IPPS Proposed 2023-based IPPS market
Cost categories basket cost market basket basket price proxies
weights cost weights
----------------------------------------------------------------------------------------------------------------
1. Compensation............................ 53.0 51.1 ...................................
A. Wages and Salaries \1\.............. 41.2 40.6 ECI for Wages and Salaries for All
Civilian Workers in Hospitals.
B. Employee Benefits \1\............... 11.7 10.5 ECI for Total Benefits for All
Civilian Workers in Hospitals.
2. Utilities............................... 2.3 1.8 ...................................
A. Electricity and Other Non-Fuel 1.5 1.5 PPI Commodity for Commercial
Utilities. Electric Power.
B. Fuel: Oil and Gas................... 0.8 0.4 Blend of PPIs.
3. Professional Liability Insurance........ 1.0 1.0 CMS Hospital Professional Liability
Insurance Premium Index.
4. All Other............................... 43.8 46.0 ...................................
A. All Other Products.................. 18.4 20.5 ...................................
(1.) Pharmaceuticals............... 7.1 7.4 PPI Commodity for Pharmaceuticals
for Human Use, Prescription.
(2.) Food: Direct Purchases........ 1.6 1.3 PPI Commodity for Processed Foods
and Feeds.
(3.) Food: Contract Services....... 1.8 2.2 CPI for Food Away From Home.
(4.) Chemicals..................... 0.6 0.6 Blend of PPIs.
(5.) Blood and Blood Products...... 0.6 0.5 PPI Industry for Blood and Organ
Banks.
(6.) Medical Instruments........... 4.1 5.3 Blend of PPIs.
(7.) Rubber and Plastics........... 0.6 0.7 PPI Commodity for Rubber and
Plastic Products.
(8.) Paper and Printing Products... 0.9 0.9 Blend of PPIs.
(9.) Miscellaneous Products........ 1.2 1.5 PPI Commodity for Finished Goods
less Food and Energy.
B. Labor-Related Services.............. 14.7 14.8 ...................................
(1.) Professional Fees: Labor- 8.6 10.0 ECI for Total Compensation for
Related. Private Industry Workers in
Professional and Related.
(2.) Administrative and Facilities 1.1 0.8 ECI for Total Compensation for
Support Services. Private Industry Workers in Office
and Administrative Support.
(3.) Installation, Maintenance and 2.4 1.5 ECI for Total Compensation for
Repair Services. Civilian Workers in Installation,
Maintenance, and Repair.
(4.) All Other: Labor-Related 2.6 2.6 ECI for Total Compensation for
Services. Private Industry Workers in
Service Occupations.
C. Nonlabor-Related Services........... 10.7 10.7 ...................................
(1.) Professional Fees: Nonlabor- 7.0 7.0 ECI for Total Compensation for
Related. Private Industry Workers in
Professional and Related.
[[Page 18244]]
(2.) Financial Services............ 1.4 1.8 ECI for Total Compensation for
Private Industry Workers in
Financial Activities.
(3.) Telephone Services............ 0.4 0.3 CPI for Telephone Services.
(4.) All Other: Nonlabor-Related 1.8 1.5 CPI for All Items less Food and
Services. Energy.
--------------------------------
Total.......................... 100.0 100.0 ...................................
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
one decimal and, therefore, the detail may not add to the total due to rounding.
1 Contract labor is distributed to wages and salaries and employee benefits based on the share of total
compensation that each category represents.
Table IV-06 compares both the historical and forecasted percent
changes in the 2018-based IPPS market basket and the proposed 2023-
based IPPS market basket. The forecasted growth rates in Table IV-06
are based on IHS Global Inc.'s (IGI's) fourth quarter 2024 forecast
with historical data through third quarter 2024.
Table IV-06--2018-Based and Proposed 2023-Based IPPS Hospital Market
Basket Percent Change, FY 2021 Through FY 2028
------------------------------------------------------------------------
Proposed 2023-
2018-based IPPS based IPPS market
Fiscal year (FY) market basket basket percent
percent change change
------------------------------------------------------------------------
Historical data:
FY 2021....................... 3.0 2.8
FY 2022....................... 5.7 5.3
FY 2023....................... 4.8 4.9
FY 2024....................... 3.6 3.7
Average FYs 2021-2024......... 4.3 4.2
Forecast:
FY 2025....................... 3.4 3.5
FY 2026....................... 3.3 3.2
FY 2027....................... 3.1 3.0
FY 2028....................... 2.9 2.9
Average FYs 2025-2028......... 3.2 3.2
------------------------------------------------------------------------
Source: IHS Global, Inc., 4th Quarter 2024 forecast.
The average percent change of the proposed 2023-based IPPS market
basket is 0.1 percentage point lower than the average percent change of
the 2018-based IPPS market basket over the FY 2021 through FY 2024 time
period. For FY 2026, the proposed 2023-based IPPS market basket is
projected to increase 3.2 percent, which is 0.1 percentage point lower
than the FY 2026 projected increase of the 2018-based IPPS market
basket. The lower projected increase of the proposed 2023-based IPPS
market basket compared to the 2018-based IPPS market basket is
primarily a result of the lower compensation cost weight in the
proposed 2023-based IPPS market basket. The compensation cost weights
in the proposed 2023-based and 2018-based IPPS market basket were
calculated from the hospital Medicare cost reports using the same
methodology.
3. Labor-Related Share
Under section 1886(d)(3)(E) of the Act, the Secretary estimates
from time to time the proportion of payments that are labor-related.
Section 1886(d)(3)(E) of the Act states that the Secretary shall adjust
the proportion, (as estimated by the Secretary from time to time) of
hospitals' costs which are attributable to wages and wage-related
costs, of the DRG prospective payment rates. We refer to the proportion
of hospitals' costs that are attributable to wages and wage-related
costs as the ``labor-related share.''
The labor-related share is used to determine the proportion of the
national PPS base payment rate to which the area wage index is applied.
We include a cost category in the labor-related share if the costs are
labor intensive and vary with the local labor market. For this proposed
rule, we propose to include in the labor-related share the national
average proportion of operating costs that are attributable to the
following cost categories in the proposed 2023-based IPPS market
basket: Wages and Salaries, Employee Benefits, Professional Fees:
Labor-Related, Administrative and Facilities Support Services,
Installation, Maintenance, and Repair Services, and All Other: Labor-
Related Services, as we did in the FY 2022 IPPS/LTCH PPS final rule (86
FR 45204).
Similar to the 2018-based IPPS market basket, for the proposed
2023-based IPPS market basket we propose to classify expenses into the
Professional Fees: Labor-Related cost category using the Benchmark I-O
data, and then for this rebasing supplement these estimates with data
obtained from the Medicare hospital cost report regarding the
proportion of expenses classified as professional fees (for example,
advertising, legal services, accounting and auditing, engineering, and
[[Page 18245]]
management consulting) that are purchased within the local area labor
market. The 2018-based IPPS market basket (86 FR 45204 through 45205)
used a survey of hospitals conducted by CMS in 2008 (OMB Control Number
0938-1036) to supplement the Benchmark I-O data and determine this
proportion. Effective for transmittal 18 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Transmittals/r18p240i),
the hospital Medicare cost report (CMS Form 2552-10, OMB No. 0938-0050)
Worksheet S-2, Part I collects information on whether a hospital
purchased professional services (for example, legal, accounting, tax
preparation, bookkeeping, payroll, advertising, and management/
consulting services or both) from an unrelated organization and if the
majority of these expenses were purchased from unrelated organizations
located outside of the main hospital's local area labor market.
For the proposed 2023-based IPPS market basket, we propose to
determine the proportion of expenses classified as professional fees
that meet our definition of labor-related services based on the
Medicare cost report data. Based on these data, approximately 73
percent of IPPS hospitals (approximately 2,100) purchased professional
services from an unrelated organization in 2023 as reported on
Worksheet S-2, Part I, column 1, line 123 (that is, answered Yes) and
also indicated whether the majority of these expenses are purchased
outside their local labor market (reported Yes or No on Worksheet S-2,
Part I, column 2, line 123). Of those hospitals, 37 percent of them
purchased the majority of these expenses from unrelated organizations
located in a CBSA outside of the main hospital CBSA as reported on
Worksheet S-2, Part I, column 2, line 123. For these reporters (which
accounted for 32 percent of total Medicare allowable operating costs)
that indicated they purchased the majority of these services outside of
the local labor market, we need to estimate a specific proportion of
these services that are purchased inside the local labor market. For
these reporters, we use 25 percent (the median of 1 percent to 49
percent range) to estimate of the proportion of these services that are
purchased inside of the local labor market. For the remaining reporters
(which accounted for 68 percent of total Medicare allowable operating
costs) that indicated they purchased the majority of these services
inside the local labor market we use 75 percent (the median of 51
percent to 100 percent). To estimate the overall proportion of expenses
classified as professional fees that meet our definition of labor-
related services (that is, reflects services purchased inside of the
local labor market), for the first group of reporters we multiply 32
percent times 25 percent, which yields an estimate of 8 percent, and
for the second group of reporters multiply 68 percent times 75 percent,
which yields an estimated proportion of 51 percent. Combining these two
measures yields 59 percent (8 percent plus 51 percent), which reflects
the overall proportion of total Medicare allowable operating expenses
that are purchased inside the local labor market and would be reflected
in our labor-related measure. Therefore, we propose to allocate 59
percent of the Benchmark I-O expenses classified as professional fees
to estimate Professional Fees: Labor-Related cost weight, and 41
percent of the Benchmark I-O expenses classified as professional fees
to estimate Professional Fees: Nonlabor-Related cost weight.
In the proposed 2023-based IPPS market basket, expenses classified
as professional fees that are subject to allocation represent
approximately 9.8 percent of total operating costs. Based on the
Medicare cost report results, we propose to apportion 5.8 percentage
points of the 9.8 percentage point figure into the Professional Fees:
Labor-Related cost category (59 percent of 9.8 percent) and designate
the remaining approximately 4.0 percentage points into the Professional
Fees: Nonlabor-Related cost category (41 percent of 9.8 percent). We
note that in the 2018-based IPPS market basket given the data available
from the 2008 survey, we classified some expenses from the 2012
Benchmark I-O data as Professional Fees: Labor-Related, some expenses
as Professional Fees: Nonlabor-Related, and some expenses as
professional fees subject to allocation based on the survey. We then
applied the 2008 survey results to the following specific categories of
expenses: Legal services, Accounting, tax preparation, bookkeeping, and
payroll services, Architectural, engineering and related services, and
Management consulting services. However, for the 2023-based IPPS market
basket, we are proposing to revise the methodology to now use the data
as reported on the Medicare cost reports (Worksheet S-2, Part I) to
allocate all of the expenses we propose to classify as professional
fees costs from the 2017 Benchmark I-O data. The impact of this
proposed change is an increase in the proposed 2023-based Professional
Fees: Labor-Related cost weight of about one percentage point.
In addition to the professional services listed earlier, we also
classify a proportion of the Home Office/Related Organization Contract
Labor cost weight into the Professional Fees: Labor-Related cost
category as was done in the previous rebasing. We believe that many of
these costs are labor-intensive and vary with the local labor market.
However, data indicate that not all IPPS hospitals with home offices
have home offices located in their local labor market. Therefore, we
propose to include in the labor-related share only a proportion of the
Home Office/Related Organization Contract Labor cost weight based on
the methodology described in this proposed rule.
For the proposed 2023-based IPPS market basket, based on Medicare
cost report data, we found that approximately 71 percent of IPPS
hospitals reported some type of home office information on their
Medicare cost report for 2023 (for example, city, State, and zip code).
Using the data reported on the Medicare cost report, we compared the
location of the hospital with the location of the hospital's home
office. We then determined the proportion of home office/related
organization contract labor cost that should be allocated to the labor-
related share based on the percent of the home office/related
organization contract labor costs for those hospitals that had home
offices located in their respective local labor markets--defined as
being in the same MSA. We determined a hospital's and home office's
MSAs using their zip code information from the Medicare cost report.
Based on these data, we determined the proportion of costs that
should be allocated to the labor-related share based on the percent of
hospital home office/related organization contract labor costs (equal
to the sum of Worksheet S-3, Part II, column 4, lines 14.01, 14.02,
25.50, and 25.51). Using this methodology, we determined that 62
percent of hospitals' home office compensation costs were for home
offices located in their respective local labor markets. Therefore, we
propose to allocate 62 percent of Home Office/Related Organization
Contract Labor cost weight to the labor-related share. The 2018-based
IPPS market basket used a 60 percent proportion, which was based on the
same methodology and the 2018 Medicare cost report data.
In the proposed 2023-based IPPS market basket, the Home Office/
Related Organization Contract Labor cost weight that is subject to
allocation based on the home office allocation methodology
[[Page 18246]]
represented 6.7 percent of total operating costs. Based on the results
of the home office analysis, as previously discussed, we apportioned
approximately 4.2 percentage points of the 6.7 percentage points figure
into the Professional Fees: Labor-Related cost category and designated
the remaining approximately 2.6 percentage points into the Professional
Fees: Nonlabor-Related cost category.\210\ In summary, based on the two
previously mentioned allocations, we apportioned 10.0 percentage points
(sum of the professional fees (5.8 percentage points) and Home Office/
Related Organization Contract Labor cost weight (4.2 percentage
points)) into the Professional Fees: Labor-Related cost category. Using
these two methods, we then apportion 6.6 percentage points (sum of the
professional fees (4.0 percentage points) and Home Office/Related
Organization Contract Labor cost weight (2.6 percentage points)) to the
Professional Fees: Nonlabor-related cost category to be included with
other costs classified as Professional Fees: Nonlabor-Related
(approximately 0.4 percentage point), resulting in a proposed
Professional Fees: Nonlabor-related cost weight of 7.0 percent. The
resulting proposed 2023-based Professional Fees: Labor-related cost
weight is about 1.4 percentage points higher than the 2018-based
Professional Fees: Labor-related cost weight.
---------------------------------------------------------------------------
\210\ Note: The cost weights are calculated using three decimal
places. For presentational purposes, we are displaying one decimal
and therefore, the detail may not add to the total due to rounding.
---------------------------------------------------------------------------
Table IV-07 presents a comparison of the proposed 2023-based labor-
related share and the 2018-based labor-related share. As discussed in
section IV.B.1.b. of the preamble of this proposed rule, the Wages and
Salaries and Employee Benefits cost weights reflect contract labor
costs.
Table IV-07--Comparision of the 2018-Based Labor-Related Share and the
Proposed 2023-Based Labor-Related Share
------------------------------------------------------------------------
Proposed 2023-
2018-based IPPS based IPPS market
market basket basket cost
cost weights weights
------------------------------------------------------------------------
Wages and Salaries................ 41.2 40.6
Employee Benefits................. 11.7 10.5
Professional Fees: Labor-Related.. 8.6 10.0
Administrative and Facilities 1.1 0.8
Support Services.................
Installation, Maintenance, and 2.4 1.5
Repair Services..................
All Other: Labor-Related Services. 2.6 2.6
-------------------------------------
Total Labor-Related Share..... 67.6 66.0
------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.
Using the cost category weights from the proposed 2023-based IPPS
market basket, we calculated a labor-related share of 66.0 percent, 1.6
percentage points lower than the current labor-related share of 67.6
percent. This downward revision to the labor-related share is primarily
the result of incorporating the more recent 2023 Medicare cost report
data for Wages and Salaries, Employee Benefits, and Contract Labor
costs. This is partially offset by an increase in the Professional
Fees: Labor-Related cost weight.
Therefore, we propose to use a labor-related share of 66.0 percent
for discharges occurring on or after October 1, 2025. We continue to
believe, as we have stated in the past, that these operating cost
categories are related to, influenced by, or vary with the local
markets. Therefore, our definition of the labor-related share continues
to be consistent with section 1886(d)(3) of the Act. We note that
section 403 of Public Law 108-173 amended sections 1886(d)(3)(E) and
1886(d)(9)(C)(iv) of the Act to provide that the Secretary must employ
62 percent as the labor-related share unless 62 percent would result in
lower payments to a hospital than would otherwise be made.
C. Market Basket for Certain Hospitals Presently Excluded From the IPPS
As explained in the FY 2006 IPPS final rule (70 FR 47396 through
47398), beginning with FY 2006, we have used the percentage increase in
the IPPS operating market basket to update the target amounts for
children's hospitals, the 11 cancer hospitals, and RNHCIs.
Consistent with the regulations at Sec. Sec. 412.23(g) and
413.40(a)(2)(ii)(A) and (c)(3)(viii), we also have used the percentage
increase in the IPPS operating market basket to update target amounts
for short-term acute care hospitals located in the U.S. Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa. In the FY 2018
IPPS/LTCH PPS final rule, we rebased and revised the IPPS operating
market basket to a 2014 base year, effective for FY 2018 and subsequent
fiscal years (82 FR 38158 through 38175), and finalized the use of the
percentage increase in the 2014-based IPPS operating market basket to
update the target amounts for children's hospitals, the 11 cancer
hospitals, RNHCIs, and short-term acute care hospitals located in the
U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American
Samoa for FY 2018 and subsequent fiscal years. Effective for the FY
2022 IPPS/LTCH PPS final rule (86 FR 45194 through 45207), we rebased
and revised the IPPS operating market basket to a 2018 base year.
Therefore, we used the percentage increase in the 2018-based IPPS
operating market basket to update the target amounts for children's
hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa for FY 2022 and subsequent fiscal
years.
As discussed in this section IV. of the preamble of this proposed
rule, we propose to rebase and revise the IPPS operating market basket
to a 2023 base year. We continue to believe that it is appropriate to
use the increase in the IPPS operating market basket to update the
target amounts for these excluded facilities, as discussed in prior
rulemaking. Therefore, we propose to use the percentage increase in the
proposed 2023-based IPPS operating market basket to update the target
amounts for children's hospitals, the 11 cancer hospitals, RNHCIs, and
short-term acute care hospitals located in the U.S. Virgin Islands,
Guam, the Northern
[[Page 18247]]
Mariana Islands, and American Samoa for FY 2026 and subsequent fiscal
years. Accordingly, for FY 2026, the rate-of increase percentage to be
applied to the target amount for these hospitals would be the FY 2026
percentage increase in the proposed 2023-based IPPS operating market
basket. Furthermore, we are proposing that if more recent data become
available for the FY 2026 IPPS/LTCH PPS final rule, we would use such
data, if appropriate, to calculate the IPPS operating market basket
rate of increase for FY 2026.
D. Rebasing and Revising the Capital Input Price Index (CIPI)
The CIPI was originally described in the FY 1993 IPPS final rule
(57 FR 40016). There have been subsequent discussions of the CIPI
presented in the IPPS proposed and final rules. The FY 2022 IPPS/LTCH
PPS final rule (86 FR 45208 through 45213) described the most recent
rebasing and revising of the CIPI to a 2018 base year, which reflected
the capital cost structure of IPPS hospitals available at that time.
Effective for FY 2026, we are proposing to rebase and revise the
CIPI to a 2023 base year to reflect a more current structure of capital
costs for IPPS hospitals. We invite public comments on our proposed
methodology discussed in this section of this proposed rule, for
deriving the proposed 2023-based CIPI. This proposed 2023-based CIPI
was derived using data from the 2023 cost reports for IPPS hospitals,
which includes providers whose cost reporting period began on or after
October 1, 2022, and prior to September 30, 2023. We are also proposing
to start with the same subset of Medicare cost reports from IPPS
hospitals as previously described in section IV.B.1.a. of the preamble
of this proposed rule. As with the 2018-based index, we are proposing
to develop two sets of weights to derive the proposed 2023-based CIPI.
The first set of weights identifies the proportion of hospital capital
expenditures attributable to each expenditure category, while the
second set of weights is a set of relative vintage weights for
depreciation and interest. The set of vintage weights is used to
identify the proportion of capital expenditures within a cost category
that is attributable to each year over the useful life of the capital
assets in that category. A more thorough discussion of vintage weights
is provided later in this section.
Using 2023 Medicare cost reports (CMS Form 2552-10, OMB Control
number 0938-0050), we are able to obtain capital costs for the
following categories: Depreciation, Interest, Lease, and Other.
Specifically, we are proposing to determine what proportion of total
capital costs that each category represents using the data reported by
IPPS hospitals on Worksheet A-7, Part III. We are proposing that
Depreciation costs are equal to the sum of Worksheet A-7, Part III,
column 9, lines 1 and 2. We are proposing that Interest costs are equal
to the sum of Worksheet A-7, Part III, column 11, lines 1 and 2. We are
proposing that Lease costs are equal to the sum of Worksheet A-7, Part
III, column 10, lines 1 and 2. We are proposing that Other costs are
equal to the sum of Worksheet A-7, Part III, columns 12 through 14,
lines 1 and 2. We are proposing that Total Capital costs are equal to
the sum of Worksheet A-7, Part III, column 15, lines 1 and 2. We are
proposing to derive cost weights for each IPPS hospital for each CIPI
cost category by calculating the ratio of the costs reported for each
cost category (for example, Depreciation) to Total Capital costs.
Finally, we are proposing to apply a set of simultaneous trims based on
these derived cost weights to remove outliers. Specifically, we are
proposing to only include cost reports for providers where their
Depreciation cost weight is between 25 percent and 90 percent; Interest
cost weight is between 0 and 75 percent, Lease cost weight is between 0
and 50 percent and Total Capital costs are greater than zero and less
than Total Facility Costs reported on Worksheet B, Part I, column 26,
line 202. The trimming process is done simultaneously on each cost
category so that if a cost weight is outside the specific range for one
or more of the cost weight criteria mentioned, the provider is excluded
from the sample. We note that these proposed trimming methods are the
same types of edits performed for the 2018-based CIPI. We then are
proposing to sum the costs for each cost category (Depreciation,
Interest, Lease, and Other) and divide each sum by the sum of Total
Capital costs for this same set of IPPS hospitals. The ratio of the
total costs for each category to the sum of Total Capital costs
represents the cost weight for each of the Depreciation, Interest,
Lease and Other cost categories. This is the same methodology as was
used for the 2018-based CIPI. As shown in the left column of Table IV-
08, in 2023 depreciation expenses accounted for 67.2 percent of total
capital costs, interest expenses accounted for 15.2 percent, leasing
expenses accounted for 11.6 percent, and other capital expenses
accounted for 6.0 percent.
We also are proposing to allocate lease costs across each of the
remaining capital cost categories as was done in the 2018-based CIPI.
We are proposing to proportionally distribute leasing costs among the
cost categories of Depreciation, Interest, and Other, reflecting the
assumption that the underlying cost structure of leases is similar to
that of capital costs in general. As was done for the 2018-based CIPI,
we are proposing to assume that 10 percent of the lease costs as a
proportion of total capital costs represents overhead and to assign
those costs to the Other capital cost category accordingly. Therefore,
we are assuming that approximately 1.2 percent (11.6 percent x 0.1) of
total capital costs represent lease costs attributable to overhead, and
we are proposing to add this 1.2 percent to the 6.0 percent Other cost
category weight. We are then proposing to distribute the remaining
lease costs (10.4 percent, or 11.6 percent-1.2 percent) proportionally
across the three cost categories (Depreciation, Interest, and Other)
based on the proportion that these categories comprise of the sum of
the Depreciation, Interest, and Other cost categories (excluding lease
expenses). For example, the Other cost category represented 6.7 percent
of all three cost categories (Depreciation, Interest, and Other) prior
to any lease expenses being allocated. This 6.7 percent is applied to
the 10.4 percent of remaining lease expenses so that another 0.7
percent of lease expenses as a percent of total capital costs is
allocated to the Other cost category. Therefore, the resulting proposed
Other cost weight is 7.8 percent (calculated using unrounded numbers,
which is approximately equal to 6.0 percent + 1.2 percent + 0.7
percent). This is the same methodology used for the 2018-based CIPI.
The resulting cost weights of the proposed allocation of lease expenses
are shown in the right column of Table IV-08.
[[Page 18248]]
Table IV-08--Proposed Allocation of Lease Expenses for the Proposed 2023-
Based CIPI
------------------------------------------------------------------------
Proposed cost Proposed cost
shares obtained shares after
from medicare allocation of
Cost categories cost reports lease expenses
(percent of total (percent of total
capital costs) capital costs)
------------------------------------------------------------------------
Depreciation...................... 67.2 75.1
Interest.......................... 15.2 17.0
Lease............................. 11.6 .................
Other............................. 6.0 7.8
------------------------------------------------------------------------
Note: Detail may not add to 100 percent due to rounding.
Finally, we are proposing to further divide the Depreciation and
Interest cost categories. We are proposing to separate the Depreciation
cost category into the following two categories: (1) Building and Fixed
Equipment and (2) Movable Equipment. We also are proposing to separate
the Interest cost category into the following two categories: (1)
Government/Nonprofit; and (2) For-profit. These are the same categories
used for the 2018-based CIPI.
To disaggregate the depreciation cost weight, we needed to
determine the percent of total depreciation costs for IPPS hospitals
(after the allocation of lease costs) that are attributable to building
and fixed equipment, which we hereafter refer to as the ``fixed
percentage.'' After applying the trim requiring that the Depreciation
cost weight is between 25 percent and 90 percent as described
previously, for the providers remaining, we calculate the fixed
percentage as the ratio of the sum of building and fixed equipment
depreciation (Worksheet A-7, Part III, column 9, line 1) to the sum of
total depreciation (sum of Worksheet A-7, Part III column 9, lines 1
and 2). Based on the 2023 IPPS Medicare cost reports, we have
determined that depreciation costs for building and fixed equipment
account for approximately 52 percent of total depreciation costs, while
depreciation costs for movable equipment account for approximately 48
percent of total depreciation costs. This is the same methodology used
for the 2018-based CIPI. As was done for the 2018-based CIPI, we are
proposing to apply this fixed percentage to the depreciation cost
weight (after leasing costs are included) to derive a Depreciation cost
weight attributable to Building and Fixed Equipment and a Depreciation
cost weight attributable to Movable Equipment.
To disaggregate the Interest cost weight, we needed to determine
the percent of total interest costs for IPPS hospitals that are
attributable to government and nonprofit facilities, which we hereafter
refer to as the ``nonprofit percentage,'' because interest price
pressures tend to differ between nonprofit and for-profit facilities.
After applying the trim requiring that the Interest cost weight is
between 0 percent and 75 percent as described previously, for the
providers remaining, we calculate the nonprofit percentage as the ratio
of the sum of interest costs (Worksheet A-7, Part III, column 11, lines
1 and 2) for government and nonprofit facilities to the sum of total
interest costs for all facilities. This is the same methodology used
for the 2018-based CIPI. The nonprofit percentage determined using this
method is 91 percent. Table IV-09 provides a comparison of the 2018-
based CIPI cost weights and the proposed 2023-based CIPI cost weights.
After the capital cost category weights were computed, it was necessary
to select appropriate price proxies to reflect the rate-of-increase for
each expenditure category. We are proposing to use the same price
proxies as were used in the 2018-based CIPI, which are listed in Table
IV-09. We also are proposing to continue to vintage weight the capital
price proxies for Depreciation and Interest to capture the long-term
consumption of capital. This vintage weighting method is the same
general method that was used for the 2018-based CIPI (with a proposed
change to the data source used to derive the vintage weights) and is
described later in this section of this proposed rule.
For the Depreciation--Building and Fixed Equipment cost category,
we are proposing to continue to use the BEA Chained Price Index for
Private Fixed Investment in Structures, Nonresidential, Hospitals and
Special Care (BEA Table 5.4.4. Price Indexes for Private Fixed
Investment in Structures by Type) as the price proxy. This BEA index is
intended to capture prices for construction of facilities such as
hospitals, nursing homes, hospices, and rehabilitation centers. For the
Depreciation--Movable Equipment cost category, we are proposing to
continue to use the PPI Commodity for Machinery and Equipment (BLS
series code WPU11) as the price proxy. This price index reflects price
inflation associated with a variety of machinery and equipment that
would be utilized by hospitals including but not limited to
communication equipment, computers, and medical equipment. For the
Nonprofit Interest cost category, we are proposing to continue to use
the average yield on domestic municipal bonds (Bond Buyer 20-bond
index) as the price proxy. For the For-profit Interest cost category,
we are proposing to continue to use the iBoxx AAA Corporate Bond Yield
index as the price proxy. For the Other capital cost category
(including insurances, taxes, and other capital-related costs), we are
proposing to continue to use the CPI for Rent of Primary Residence (All
Urban Consumers) (BLS series code CUUS0000SEHA) as the price proxy. We
believe that these price series continue to be the most appropriate
proxies for IPPS capital costs that meet our selection criteria of
relevance, timeliness, availability, and reliability.
[[Page 18249]]
Table IV-09--Proposed 2023-Based CIPI Cost Weights and Price Proxies Compared to 2018-Based CIPI Cost Weights
----------------------------------------------------------------------------------------------------------------
2018 cost Proposed 2023
Cost categories weights cost weights Proposed price proxy
----------------------------------------------------------------------------------------------------------------
Total...................................... 100.0 100.0
Depreciation........................... 76.8 75.1
Building and Fixed Equipment....... 39.3 39.3 BEA's Chained Price Index for
Private Fixed Investment in
Structures, Nonresidential,
Hospitals and Special Care.
Movable Equipment.................. 37.5 35.9 PPI Commodity for Machinery and
Equipment.
Interest............................... 16.6 17.0
Government/Nonprofit............... 14.9 15.4 Average Yield on Domestic Municipal
Bonds (Bond Buyer 20-Bond Index).
For-Profit......................... 1.7 1.6 Average Yield on iBoxx AAA
Corporate Bonds.
Other...................................... 6.6 7.8 CPI for Rent of Primary Residence.
----------------------------------------------------------------------------------------------------------------
Note: The cost weights are calculated using three decimal places. For presentational purposes, we are displaying
one decimal and therefore, the detail may not add to the total due to rounding.
Because capital is acquired and paid for over time, capital
expenses in any given year are determined by both past and present
purchases of physical and financial capital. The proposed vintage-
weighted 2023-based CIPI is intended to capture the long-term
consumption of capital, using vintage weights for depreciation
(physical capital) and interest (financial capital). These vintage
weights reflect the proportion of capital purchases attributable to
each year of the expected life of building and fixed equipment, movable
equipment, and interest.
Vintage weights are an integral part of the CIPI. Capital costs are
inherently complicated and are determined by complex capital purchasing
decisions, over time, based on such factors as interest rates and debt
financing. In addition, capital is depreciated over time instead of
being consumed in the same period it is purchased. By accounting for
the vintage nature of capital, we are able to provide an accurate and
stable annual measure of price changes. Annual nonvintage price changes
for capital are unstable due to the volatility of interest rate changes
and, therefore, do not reflect the actual annual price changes for IPPS
capital costs. The CIPI reflects the underlying stability of the
capital acquisition process.
To calculate the vintage weights for depreciation and interest
expenses, we first needed a time series of capital purchases for
building and fixed equipment and movable equipment. We found no single
source that provides an appropriate time series of capital purchases by
hospitals for all of the components of capital purchases previously
noted. For the 2018-based CIPI, we calculated capital purchases using
data on total expenses from the American Hospital Association (AHA) for
the years 1964 through 2018 and the method was described in the FY 2022
IPPS/LTCH PPS final rule (86 FR 45210). The data from AHA are no longer
available beyond 2020 and, therefore, for the 2023-based CIPI, we are
proposing to use an alternative data source for deriving the capital
purchases needed to calculate the vintage weights. Specifically, we are
proposing to obtain a time series of building and fixed equipment
acquisitions (that is, purchases) and movable equipment acquisitions
using two different data sources. For the years 1996 through 2023, we
are proposing to use data from Worksheet A-7 on the Medicare cost
report as reported by IPPS hospitals (with the exception of 2002
through 2004 due to the temporary discontinuation of Worksheet A-7 from
the Medicare cost report in those years). For the years 1977 through
1995 we are proposing to use the growth rates in the building and fixed
equipment and movable equipment acquisitions derived using our previous
method used for the 2018-based CIPI (based on AHA data) to extrapolate
the levels from the Medicare cost report back in time. Below we provide
the proposed steps for calculating capital acquisitions (that is,
capital purchases) used to derive the vintage weights for the proposed
2023-based CIPI.
Step 1--We obtain data from Worksheet A-7 of the Medicare cost
reports and apply basic trims. Specifically, for 1996 through 2010 we
use the CMS Form 2552-96, OMB Control number 0938-0050 and for 2010
through 2023 we use the CMS Form 2552-10, OMB Control number 0938-0050
(where 2010 data were collected using both forms). Specific cost report
references in this discussion are based on the CMS Form 2552-10, OMB
Control number 0938-0050. For each of the years 1996 through 2001 and
2005 through 2023, we propose to apply a set of general trims based on
data obtained from Worksheet A-7 requiring that total capital costs
(sum of Worksheet A-7, part III, column 15, lines 1 and 2) are greater
than zero; beginning values of building and fixed equipment (sum of
Worksheet A-7, part I, column 1, lines 2 through 5) and movable
equipment (sum of Worksheet A-7, part I, column 1, lines 6 and 7) are
greater than zero; ending asset values of building and fixed equipment
and movable equipment are greater than zero; building and fixed
equipment depreciation is greater than zero; movable equipment
depreciation is greater than zero; building and fixed equipment
acquisitions are greater than zero; movable equipment acquisitions are
greater than zero as well as total facility costs (Worksheet B, part I,
column 26, line 202) are greater than zero.
In addition to these basic edits, we also propose to remove
outliers in the data by trimming separately the top and bottom 1
percent building and fixed equipment useful lives and top and bottom 1
percent movable equipment useful lives. We first calculate the building
and fixed equipment useful life and movable equipment useful life for
each hospital for the years 1996 through 2001 and 2005 through 2023.
The expected life of any asset can be determined by dividing the value
of the asset (excluding fully depreciated assets) by its current year
depreciation amount. This calculation yields the estimated expected
life of an asset if the rates of depreciation were to continue at
current year levels, assuming straight-line depreciation. We propose to
calculate the building and fixed equipment useful life as the ending
value of fixed assets (sum of Worksheet
[[Page 18250]]
A-7, part I, column 6, lines 2 through 5, less sum of Worksheet A-7,
part I, column 7, lines 2 through 5) divided by fixed asset
depreciation (Worksheet A-7, part III, column 9, line 1). We propose to
calculate the movable equipment useful life as the ending value of
movable assets (sum of Worksheet A-7, part I, column 6, lines 6 through
7, less sum of Worksheet A-7, part I, column 7, lines 6 through 7)
divided by movable depreciation (Worksheet A-7, part III, column 9,
line 2). For the remaining hospitals (after applying the top and bottom
1 percent trim on useful lives), we obtain a time series of building
and fixed equipment acquisitions (sum of Worksheet A-7, part I, columns
2 and 3, lines 2 through 5) and a time series of movable equipment
acquisitions (sum of Worksheet A-7, part I, columns 2 and 3, lines 6
through 7).
Step 2--Due to the temporary discontinuation of Worksheet A-7 from
the Medicare cost reports for the years 2002 through 2004, we need to
derive the building and fixed equipment acquisitions and movable
equipment acquisitions using a slightly different methodology. First,
for each of the years 1996 through 2001 and 2005 through 2023 we
calculate the annual ratio of the sum of building and fixed equipment
acquisitions from Worksheet A-7 to the sum of building and fixed
equipment ending asset values from Worksheet G. We next estimate these
fixed ratios for 2002 through 2004 (when Worksheet A-7 data are not
available) by straight-line interpolating the ratios between 2001 and
2005. Finally, we multiply these fixed ratios for 2002 through 2004 by
the total ending building and fixed equipment asset values (as reported
on Worksheet G). This results in an estimate of building and fixed
equipment acquisitions for the years 2002 through 2004. We use this
same methodology to derive movable equipment acquisitions using the
movable equipment data. We note that the total ending asset values from
Worksheet G are calculated after the application of a set of general
trims (similar to those in Step 1) requiring total capital costs to be
greater than zero and ending asset values of building and fixed
equipment and movable equipment (as reported on Worksheet G) to be
greater than zero.
Step 3--As done with prior vintage weights (including those used in
the 2018-based CIPI), we propose to use a time series of capital
acquisitions of more than 50 years in the derivation of the vintage
weights. Since we only have Medicare cost report data back to 1996, we
are proposing to derive capital acquisitions for the prior period based
on the capital acquisitions used to derive the vintage weights for the
2018-based CIPI based on AHA data. Specifically, beginning with the
1996 acquisition level derived in Step 1 (first year of data available
from the Medicare cost reports) we propose to apply the growth rate of
acquisitions derived using the prior method going back to 1977. We do
this separately for both building and fixed equipment acquisitions and
movable equipment acquisitions.
As done in prior CIPI rebasings (including the 2018-based CIPI), in
order to derive the proposed vintage weights, we need to calculate the
average useful lives for building and fixed equipment and movable
equipment based on the most recent Medicare cost report data. As
previously described in Step 1, we propose to calculate the average
building and fixed equipment useful life using 2023 Medicare cost
report data as the ending asset value of building and fixed equipment
(sum of Worksheet A-7, part I, column 6, lines 2 through 5, less sum of
Worksheet A-7, part I, column 7, lines 2 through 5) divided by building
and fixed equipment depreciation (Worksheet A-7, part III, column 9,
line 1). We propose to calculate the average movable equipment useful
life using 2023 Medicare cost report data as the ending asset value of
movable equipment (sum of Worksheet A-7, part I, column 6, lines 6
through 7, less sum of Worksheet A-7, part I, column 7, lines 6 through
7) divided by movable equipment depreciation (Worksheet A-7, part III,
column 9, line 2). Using this proposed method, we determined the
average expected life of building and fixed equipment to be equal to 28
years, and the average expected life of movable equipment to be equal
to 12 years. For the expected life of interest, we believe that vintage
weights for interest should represent the average expected life of
building and fixed equipment because, based on previous research
described in the FY 1997 IPPS final rule (61 FR 46198), the expected
life of hospital debt instruments and the expected life of buildings
and fixed equipment are similar. We note that the 2018-based CIPI was
based on an expected average life of building and fixed equipment of 27
years and an expected average life of movable equipment of 12 years.
For the building and fixed equipment and movable equipment vintage
weights, we are proposing to use the real annual capital-related
purchase amounts for each asset type to capture the actual amount of
the physical acquisition, net of the effect of price inflation. These
real annual capital-related purchase amounts are produced by deflating
the nominal annual purchase amount (as calculated in Steps 1 through 3)
by the associated price proxy as provided earlier in this proposed
rule. For the interest vintage weights, we are proposing to use the
total nominal annual capital-related purchase amounts to capture the
value of the debt instrument (including, but not limited to, mortgages
and bonds). Using these capital purchases time series specific to each
asset type, we are proposing to calculate the vintage weights for
building and fixed equipment, for movable equipment, and for interest.
The vintage weights for each asset type are deemed to represent the
average purchase pattern of the asset over its expected life (in the
case of building and fixed equipment and interest, 28 years, and in the
case of movable equipment, 12 years). For each asset type, we are
proposing to use the time series of annual capital purchases amounts
available from 1977 to 2023. These data allow us to derive twenty 28-
year periods of capital purchases for building and fixed equipment and
interest, and thirty-five 12-year periods of capital purchases for
movable equipment. For each 28-year period for building and fixed
equipment and interest, or 12-year period for movable equipment, we are
proposing to calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of
purchases over the entire 28-year or 12-year period. This calculation
was done for each year in the 28-year or 12-year period and for each of
the periods for which we have data. We then calculated the average
vintage weight for a given year of the expected life by taking the
average of these vintage weights across the multiple periods of data.
This is the same methodology used for the 2018-based CIPI but using 27
years and 12 years and reflecting data through 2018.
The vintage weights for the proposed 2023-based CIPI and the 2018-
based CIPI are presented in Table IV-10. While we are proposing an
alternative methodology for calculating the vintage weights due to the
discontinuation of AHA data, Table IV-10 shows this change had limited
impact on the results. We note that using the proposed 2023-based
vintage weights instead of the 2018-based vintage weights has a minimal
impact on the overall CIPI update (averaging 0.0 percent over FY 2021
through FY 2026).
[[Page 18251]]
Table IV-10--Proposed 2023-Based CIPI and 2018-Based CIPI Vintage Weights
--------------------------------------------------------------------------------------------------------------------------------------------------------
Building and fixed equipment Movable equipment Interest
-----------------------------------------------------------------------------------------------
Year \1\ 2018-based 27 Proposed 2023- 2018-based 12 Proposed 2023- 2018-based 27 Proposed 2023-
years based 28 years years based 12 years years based 28 years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1....................................................... 0.026 0.024 0.064 0.066 0.015 0.014
2....................................................... 0.028 0.025 0.069 0.069 0.016 0.016
3....................................................... 0.029 0.026 0.072 0.072 0.018 0.017
4....................................................... 0.031 0.027 0.075 0.075 0.019 0.018
5....................................................... 0.032 0.028 0.078 0.079 0.021 0.020
6....................................................... 0.032 0.029 0.082 0.082 0.022 0.021
7....................................................... 0.033 0.030 0.086 0.085 0.023 0.022
8....................................................... 0.034 0.030 0.088 0.089 0.026 0.024
9....................................................... 0.036 0.031 0.091 0.092 0.028 0.025
10...................................................... 0.036 0.031 0.095 0.094 0.029 0.026
11...................................................... 0.036 0.032 0.099 0.097 0.029 0.028
12...................................................... 0.036 0.033 0.101 0.100 0.031 0.030
13...................................................... 0.037 0.034 .............. .............. 0.033 0.031
14...................................................... 0.038 0.035 .............. .............. 0.036 0.033
15...................................................... 0.039 0.036 .............. .............. 0.039 0.035
16...................................................... 0.040 0.037 .............. .............. 0.041 0.037
17...................................................... 0.041 0.038 .............. .............. 0.044 0.039
18...................................................... 0.042 0.039 .............. .............. 0.046 0.041
19...................................................... 0.041 0.039 .............. .............. 0.047 0.043
20...................................................... 0.041 0.040 .............. .............. 0.049 0.045
21...................................................... 0.042 0.041 .............. .............. 0.052 0.047
22...................................................... 0.042 0.042 .............. .............. 0.053 0.049
23...................................................... 0.042 0.043 .............. .............. 0.055 0.051
24...................................................... 0.042 0.044 .............. .............. 0.055 0.053
25...................................................... 0.041 0.046 .............. .............. 0.057 0.056
26...................................................... 0.041 0.047 .............. .............. 0.058 0.058
27...................................................... 0.041 0.047 .............. .............. 0.059 0.060
28...................................................... .............. 0.047 .............. .............. .............. 0.062
-----------------------------------------------------------------------------------------------
Total............................................... 1.000 1.000 1.000 1.000 1.000 1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not add to total due to rounding.
\1\ Vintage weight in the last year (for example, year 28 for the proposed 2023-based CIPI) is applied to the most recent data point and prior vintage
weights are applied going back in time. For example, year 28 vintage weight would be applied to the 2026q3 fixed price proxy level, year 27 vintage
weight would be applied to the 2025q3 fixed price proxy level, etc.
The process of creating vintage-weighted price proxies requires
applying the vintage weights to the price proxy index where the last
applied vintage weight in Table IV-10 is applied to the most recent
data point. We have provided on the CMS website an example of how the
vintage weighting price proxies are calculated, using example vintage
weights and example price indices. The example can be found under the
following CMS website link: https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information in the zip file titled ``Weight
Calculations as described in the IPPS FY 2010 Proposed Rule.''
Table IV-11 in this section of this proposed rule compares both the
historical and forecasted percent changes in the 2018-based CIPI and
the proposed 2023-based CIPI. Over the most recent historical period,
the proposed 2023-based CIPI increases at a slightly lower rate, on
average, than the 2018-based CIPI primarily due to rebasing the CIPI
from 2018 to 2023 and updating the base year cost weights.
Table IV-11--Comparison of 2018-Based and Proposed 2023-Based Capital
Input Price Index, Percent Change, FY 2021 Through FY 2028
------------------------------------------------------------------------
CIPI, 2018- Proposed CIPI,
Fiscal year based 2023-based
------------------------------------------------------------------------
Historical Data:
FY 2021............................. 1.0 0.8
FY 2022............................. 2.0 1.8
FY 2023............................. 3.0 2.8
FY 2024............................. 2.8 2.7
Average FYs 2021-2024............... 2.2 2.0
Forecast:
FY 2025............................. 2.7 2.6
FY 2026............................. 2.7 2.6
FY 2027............................. 2.6 2.5
FY 2028............................. 2.5 2.4
[[Page 18252]]
Average FYs 2025-2028............... 2.6 2.5
------------------------------------------------------------------------
Source: IHS Global, Inc., 4th quarter 2024 forecast.
IHS Global, Inc. forecasts a 2.6 percent increase in the proposed
2023-based CIPI for FY 2026, as shown in Table IV-11. The underlying
vintage-weighted price increases for depreciation (including building
and fixed equipment and movable equipment) and interest (including
government/nonprofit and for-profit) based on the proposed 2023-based
CIPI are included in Table IV-12.
Table IV-12--Proposed 2023-Based Capital Input Price Index Percent Changes, Total and Depreciation and Interest
Components--FYs 2021 Through 2028
----------------------------------------------------------------------------------------------------------------
Fiscal year Total Depreciation Interest
----------------------------------------------------------------------------------------------------------------
Historical Data:
FY 2021................................................... 0.8 1.8 -3.7
FY 2022................................................... 1.8 2.7 -2.8
FY 2023................................................... 2.8 3.3 -1.5
FY 2024................................................... 2.7 3.3 -1.1
Forecast:
FY 2025................................................... 2.6 3.2 -0.8
FY 2026................................................... 2.6 3.2 -0.8
FY 2027................................................... 2.5 3.1 -1.0
FY 2028................................................... 2.4 3.0 -1.2
----------------------------------------------------------------------------------------------------------------
Source: IHS Global, Inc., 4th quarter 2024 forecast.
The FY 2026 percentage increase based on the proposed 2023-based
CIPI is 0.1 percentage point lower than the increase based on the 2018-
based CIPI when rounded, as shown in Table IV-11. Rebasing the CIPI
from 2018 to 2023 and updating the base year cost weights lowered the
FY 2026 update by approximately 0.1 percentage point, which was
partially offset by the incorporation of the 2023-based vintage
weights.
V. Payment Adjustment for Medicare Disproportionate Share Hospitals
(DSHs) for FY 2026 (Sec. 412.106)
A. General Discussion
Section 1886(d)(5)(F) of the Act provides for additional Medicare
payments to subsection (d) hospitals \211\ that serve a significantly
disproportionate number of low-income patients. The Act specifies two
methods by which a hospital may qualify for the Medicare
disproportionate share hospital (DSH) adjustment. Under the first
method, hospitals that are located in an urban area and have 100 or
more beds may receive a Medicare DSH payment adjustment if the hospital
can demonstrate that, during its cost reporting period, more than 30
percent of its net inpatient care revenues are derived from State and
local government payments for care furnished to patients with low
incomes. This method is commonly referred to as the ``Pickle method.''
The second method for qualifying for the DSH payment adjustment, which
is the more commonly used method, is based on the hospital's
disproportionate patient percentage (DPP), described below, under which
the DSH payment adjustment is based a complex statutory formula which
includes the hospital's geographic designation, the number of beds in
the hospital, and the level of the hospital's DPP.
---------------------------------------------------------------------------
\211\ See section 1886(d)(1)(B) of the Act for the definition of
a ``subsection (d) hospital''.
---------------------------------------------------------------------------
A hospital's DPP is the sum of two fractions: the ``Medicare
fraction'' and the ``Medicaid fraction.'' The Medicare fraction (also
known as the ``SSI fraction'' or ``SSI ratio'') is computed by dividing
the number of the hospital's inpatient days that are furnished to
patients who were entitled to both Medicare Part A and Supplemental
Security Income (SSI) benefits by the hospital's total number of
patient days furnished to patients entitled to benefits under Medicare
Part A. The Medicaid fraction is computed by dividing the hospital's
number of inpatient days furnished to patients who, for such days, were
eligible for Medicaid, but were not entitled to benefits under Medicare
Part A, by the hospital's total number of inpatient days in the same
period.
------------------------------------------------------------------------
DSH eligibility Qualifying criteria
------------------------------------------------------------------------
Statutory Formula............ A hospital that has a disproportionate
patient percentage equal to or exceeding
15 percent may qualify for the Medicare
DSH adjustment. We refer readers to 42
CFR 412.106 for the specific eligibility
criteria and payment formulas.
[[Page 18253]]
``Pickle Method''............ A hospital that is located in an urban
area and has 100 or more beds may
qualify to receive a Medicare DSH
payment adjustment if the hospital can
demonstrate that, during its cost
reporting period, more than 30 percent
of its net inpatient care revenues are
derived from State and local government
payments for care furnished to patients
with low incomes.
------------------------------------------------------------------------
Because the DSH payment adjustment is part of the IPPS, the
statutory references to ``days'' in section 1886(d)(5)(F) of the Act
have been interpreted to apply only to hospital acute care inpatient
days. Regulations located at 42 CFR 412.106 govern the Medicare DSH
payment adjustment and specify how the DPP is calculated as well as how
beds and patient days are counted in determining the Medicare DSH
payment adjustment. Under Sec. 412.106(a)(1)(i), the number of beds
for the Medicare DSH payment adjustment is determined in accordance
with bed counting rules for the IME adjustment under Sec. 412.105(b).
Section 3133 of the Patient Protection and Affordable Care Act
(Pub. L. 111-148), as amended by section 10316 of the same Act and
section 1104 of the Health Care and Education Reconciliation Act (Pub.
L. 111-152), added a section 1886(r) to the Act that modifies the
methodology for computing the Medicare DSH payment adjustment. We refer
to these provisions collectively as section 3133 of the Affordable Care
Act. Beginning with discharges in FY 2014, hospitals that qualify for
Medicare DSH payments under section 1886(d)(5)(F) of the Act receive 25
percent of the amount they previously would have received under the
statutory formula for Medicare DSH payments. This provision applies
equally to hospitals that qualify for DSH payments on the basis of the
hospital's DPP under section 1886(d)(5)(F)(i)(I) of the Act and those
hospitals that qualify under the Pickle method under section
1886(d)(5)(F)(i)(II) of the Act.
The remaining amount, equal to an estimate of 75 percent of what
otherwise would have been paid as Medicare DSH payments, reduced to
reflect changes in the percentage of individuals who are uninsured, is
available to make additional payments to each hospital that qualifies
for Medicare DSH payments and that has uncompensated care. The payments
to each hospital for a fiscal year are based on the hospital's amount
of uncompensated care for a given time period relative to the total
amount of uncompensated care for that same time period reported by all
hospitals that receive Medicare DSH payments for that fiscal year.
Since FY 2014, section 1886(r) of the Act has required that
hospitals that are eligible for DSH payments under section
1886(d)(5)(F) of the Act receive 2 separately calculated payments:
Medicare DSH Payment: An empirically justified DSH payment equal to 25%
of the amount determined under the statutory formula in section
1886(d)(5)(F) of the Act.
Medicare DSH Uncompensated Care Payment: An uncompensated care payment
determined as the product of 3 factors, as discussed in this section.
Specifically, section 1886(r)(1) of the Act provides that the
Secretary shall pay to such subsection (d) hospital 25 percent of the
amount the hospital would have received under section 1886(d)(5)(F) of
the Act for DSH payments, which represents the empirically justified
amount for such payment, as determined by the MedPAC in its March 2007
Report to Congress.\212\ We refer to this payment as the ``empirically
justified Medicare DSH payment.''
---------------------------------------------------------------------------
\212\ https://www.medpac.gov/document/march-2007-report-to-the-congress-medicare-payment-policy/.
---------------------------------------------------------------------------
In addition to this empirically justified Medicare DSH payment,
section 1886(r)(2) of the Act provides that, for FY 2014 and each
subsequent fiscal year, the Secretary shall pay to such subsection (d)
hospitals an additional amount equal to the product of three factors.
The first factor is the difference between the aggregate amount of
payments that would be made to subsection (d) hospitals under section
1886(d)(5)(F) of the Act if subsection (r) did not apply and the
aggregate amount of payments that are made to subsection (d) hospitals
under section 1886(r)(1) of the Act for such fiscal year. In other
words, the first factor of the uncompensated care payment calculation
is 75 percent of the payments that would otherwise be made as Medicare
DSH payments under section 1886(d)(5)(F) of the Act.
The second factor is, for FY 2018 and subsequent fiscal years, 1
minus the percent change in the percent of individuals who are
uninsured, as determined by comparing the percent of individuals who
were uninsured in 2013 (as estimated by the Secretary, based on data
from the Census Bureau or other sources the Secretary determines
appropriate, and certified by the Chief Actuary of CMS) and the percent
of individuals who were uninsured in the most recent period for which
data are available (as so estimated and certified). As discussed in a
later section, we note that the second factor is computed based on
estimates of the total U.S population.
The third factor is a percent that, for each subsection (d)
hospital, represents the quotient of the amount of uncompensated care
for such hospital for a period selected by the Secretary (as estimated
by the Secretary, based on appropriate data), including the use of
alternative data where the Secretary determines that alternative data
are available which are a better proxy for the costs of subsection (d)
hospitals for treating the uninsured, and the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under section 1886(r) of the Act. Therefore, this third factor
represents a hospital's uncompensated care amount for a given time
period relative to the uncompensated care amount for that same time
period for all hospitals that receive Medicare DSH payments in the
applicable fiscal year, expressed as a percent.
For each hospital, the product of these three factors represents
its additional payment for uncompensated care for the applicable fiscal
year. We refer to the additional payment determined by these factors as
the ``uncompensated care payment.'' In brief, the uncompensated care
payment for an individual hospital is determined as the product of the
following 3 factors:
Factor 1: 75% of the total amount of DSH payments that would otherwise
be made under section 1886(d)(5)(F) of the Act.
Factor 2: 1 minus the percent change in the percent of individuals who
are uninsured.
Factor 3: The hospital's uncompensated care amount relative to the
uncompensated care amount for all hospitals that receive DSH payments,
expressed as a percentage.
Section 1886(r) of the Act applies to FY 2014 and each subsequent
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620
through 50647) and the FY 2014 IPPS interim final rule with comment
period (78 FR 61191 through 61197), we set forth our policies
[[Page 18254]]
for implementing the required changes to the Medicare DSH payment
methodology made by section 3133 of the Affordable Care Act for FY
2014. In those rules, we noted that, because section 1886(r) of the Act
modifies the payment required under section 1886(d)(5)(F) of the Act,
it affects only the DSH payment under the operating IPPS. It does not
revise or replace the capital IPPS DSH payment provided under the
regulations at 42 CFR part 412, subpart M, which was established
through the exercise of the Secretary's discretion in implementing the
capital IPPS under section 1886(g)(1)(A) of the Act.
Finally, section 1886(r)(3) of the Act provides that there shall be
no administrative or judicial review under section 1869, section 1878,
or otherwise of any estimate of the Secretary for purposes of
determining the factors described in section 1886(r)(2) of the Act or
of any period selected by the Secretary for the purpose of determining
those factors. Therefore, there is no administrative or judicial review
of the estimates developed for purposes of applying the three factors
used to determine uncompensated care payments, or of the periods
selected to develop such estimates.
B. Eligibility for Empirically Justified Medicare DSH Payments and
Uncompensated Care Payments
The payment methodology under section 3133 of the Affordable Care
Act applies to ``subsection (d) hospitals'' that would otherwise
receive a DSH payment made under section 1886(d)(5)(F) of the Act.
Therefore, hospitals must receive empirically justified Medicare DSH
payments in a fiscal year to receive an additional Medicare
uncompensated care payment for that year. Specifically, section
1886(r)(2) of the Act states that, in addition to the empirically
justified Medicare DSH payment made to a subsection (d) hospital under
section 1886(r)(1) of the Act, the Secretary shall pay to ``such
subsection (d) hospitals'' the uncompensated care payment. Section
1886(r)(2)'s reference to ``such subsection (d) hospitals'' refers to
hospitals that receive empirically justified Medicare DSH payments
under section 1886(r)(1) for the applicable fiscal year.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY
2014 IPPS interim final rule with comment period (78 FR 61193), we
explained that hospitals that are not eligible to receive empirically
justified Medicare DSH payments in a fiscal year will not receive
uncompensated care payments for that year. We also specified that we
would make a determination concerning eligibility for interim
uncompensated care payments based on each hospital's estimated DSH
status (that is, eligibility to receive empirically justified Medicare
DSH payments) for the applicable fiscal year (using the most recent
data that are available). For this proposed rule, we estimated DSH
status for all hospitals using the most recent available SSI ratios and
information from the most recent available Provider Specific File. We
note that FY 2021 SSI ratios available on the CMS website were the most
recent available SSI ratios at the time of developing this proposed
rule.\213\ If more recent data on DSH eligibility becomes available
before the final rule, we would use such data in the final rule.
---------------------------------------------------------------------------
\213\ https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.
---------------------------------------------------------------------------
Our final determinations of a hospital's eligibility for
uncompensated care and empirically justified Medicare DSH payments will
be based on the hospital's actual DSH status at cost report settlement
for FY 2026.
In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and in the
rulemakings for subsequent fiscal years, we have specified our policies
for several specific classes of hospitals within the scope of section
1886(r) of the Act. Eligible hospitals include the following:
Subsection (d) Puerto Rico hospitals that are eligible for
DSH payments also are eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under section
1886(r) of the Act (78 FR 50623 and 79 FR 50006).
Sole community hospitals (SCHs) that are paid under the
IPPS Federal rate receive interim payments based on what we estimate
and project their DSH status to be prior to the beginning of the fiscal
year (based on the best available data at that time) subject to
settlement through the cost report. If they receive interim empirically
justified Medicare DSH payments in a fiscal year, they will also be
eligible to receive interim uncompensated care payments for that fiscal
year on a per discharge basis. Final eligibility determinations will be
made at the end of the cost reporting period at settlement, and both
interim empirically justified Medicare DSH payments and uncompensated
care payments will be adjusted accordingly (78 FR 50624 and 79 FR
50007).
Medicare-dependent, small rural hospitals (MDHs) are paid
based on the IPPS Federal rate or, if higher, the IPPS Federal rate
plus 75 percent of the amount by which the Federal rate is exceeded by
the updated hospital-specific rate from certain specified base years
(76 FR 51684). The IPPS Federal rate that is used in the MDH payment
methodology is the same IPPS Federal rate that is used in the SCH
payment methodology. Because MDHs are paid based on the IPPS Federal
rate, they continue to be eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments if their DPP is
at least 15 percent, and we apply the same process to determine MDHs'
eligibility for interim empirically justified Medicare DSH and interim
uncompensated care payments as we do for all other IPPS hospitals.
Recently enacted legislation has extended the MDH program through
September 30, 2025. We refer readers to section V.F. of the preamble of
this proposed rule for further discussion of the MDH program. We will
continue to make a determination concerning an MDH's eligibility for
interim empirically justified Medicare DSH and uncompensated care
payments based on the hospital's estimated DSH status for the
applicable fiscal year.
IPPS hospitals that elect to participate in the Bundled
Payments for Care Improvement Advanced (BPCI Advanced) model, will
continue to be paid under the IPPS and, therefore, are eligible to
receive empirically justified Medicare DSH payments and uncompensated
care payments until the Model's final performance year, which ends on
December 31, 2025. For further information regarding the BPCI Advanced
model, we refer readers to the CMS website at https://innovation.cms.gov/innovation-models/bpci-advanced.
Transforming Episode Accountability Model (TEAM) is a new
episode-based payment model. Hospitals participating in TEAM would
continue to be paid under the IPPS and, therefore, are eligible to
receive empirically justified Medicare DSH payments and uncompensated
care payments. The model's start date is January 1, 2026.
Ineligible hospitals include the following:
Maryland hospitals are not eligible to receive empirically
justified Medicare DSH payments and uncompensated care payments under
the payment methodology of section 1866(r) of the Act because they are
not paid under the IPPS. As discussed in the FY 2019 IPPS/LTCH PPS
final rule (83 FR 41402 through 41403), CMS and the State have entered
into an agreement to govern payments to Maryland hospitals under a new
payment model, the Maryland
[[Page 18255]]
Total Cost of Care (TCOC) Model, which began on January 1, 2019. Under
the Maryland TCOC Model, which concludes on December 31, 2026, Maryland
hospitals are not paid under the IPPS and are ineligible to receive
empirically justified Medicare DSH payments and uncompensated care
payments under section 1886(r) of the Act.
SCHs that are paid under their hospital-specific rate are
not eligible for Medicare DSH and uncompensated care payments (78 FR
50623 and 50624).
Hospitals participating in the Rural Community Hospital
Demonstration Program are not eligible to receive empirically justified
Medicare DSH payments and uncompensated care payments under section
1886(r) of the Act because they are not paid under the IPPS (78 FR
50625 and 79 FR 50008). The Rural Community Hospital Demonstration
Program was originally authorized for a 5-year period by section 410A
of the Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA) (Pub. L. 108-173).\214\ The period of participation for
the last hospital in the demonstration under this most recent
legislative authorization will end on June 30, 2028. Under the payment
methodology that applies during this most recent extension of the
demonstration program, participating hospitals do not receive
empirically justified Medicare DSH payments, and they are excluded from
receiving interim and final uncompensated care payments. At the time of
development of this proposed rule, we believe 16 hospitals may
participate in the demonstration program at the start of FY 2026. We
note that if at the time of developing the final rule there is a
different number of hospitals projected to participate in the
demonstration program during FY 2026, we would use updated information
in the FY 2026 final rule.
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\214\ The Rural Community Hospital Demonstration Program was
extended for a subsequent 5-year period by sections 3123 and 10313
of the Affordable Care Act (Pub. L. 111-148). The period of
performance for this 5-year extension period ended on December 31,
2016. Section 15003 of the 21st Century Cures Act (Pub. L. 114-255),
enacted on December 13, 2016, again amended section 410A of Public
Law 108-173 to require a 10-year extension period (in place of the
5-year extension required by the Affordable Care Act), therefore
requiring an additional 5-year participation period for the
demonstration program. Section 15003 of Public Law 114-255 also
required a solicitation for applications for additional hospitals to
participate in the demonstration program. The period of performance
for this 5-year extension period ended December 31, 2021. The
Consolidated Appropriations Act, 2021 (Pub. L. 116-260) amended
section 410A of Public Law 108-173 to extend the demonstration
program for an additional 5-year period.
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C. Empirically Justified Medicare DSH Payments
As we have discussed earlier, section 1886(r)(1) of the Act
requires the Secretary to pay 25 percent of the amount of the Medicare
DSH payment that would otherwise be made under section 1886(d)(5)(F) of
the Act to a subsection (d) hospital. Because section 1886(r)(1) of the
Act merely requires the Secretary to pay a designated percentage of
these payments, without revising the criteria governing eligibility for
DSH payments or the underlying payment methodology, we stated in the FY
2014 IPPS/LTCH PPS final rule that we did not believe that it was
necessary to develop any new operational mechanisms for making such
payments.
Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50626),
we implemented this provision by advising Medicare Administrative
Contractors (MACs) to simply adjust subsection (d) hospitals' interim
claim payments to an amount equal to 25 percent of what would have been
paid if section 1886(r) of the Act did not apply. We also made
corresponding changes to the hospital cost report so that these
empirically justified Medicare DSH payments could be settled at the
appropriate level at the time of cost report settlement. We provided
more detailed operational instructions and cost report instructions
following issuance of the FY 2014 IPPS/LTCH PPS final rule that are
available on the CMS website at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
D. Supplemental Payment for Indian Health Service (IHS) and Tribal
Hospitals and Puerto Rico Hospitals
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49047 through
49051), we established a new supplemental payment for IHS/Tribal
hospitals and hospitals located in Puerto Rico for FY 2023 and
subsequent fiscal years. This payment was established to help to
mitigate the impact of the decision to discontinue the use of low-
income insured days as a proxy for uncompensated care costs for these
hospitals and to prevent undue long-term financial disruption for these
providers. The regulations located at 42 CFR 412.106(h) govern the
supplemental payment. In brief, the supplemental payment for a fiscal
year is determined as the difference between the hospital's base year
amount and its uncompensated care payment for the applicable fiscal
year as determined under Sec. 412.106(g)(1). The base year amount is
the hospital's FY 2022 uncompensated care payment adjusted by one plus
the percent change in the total uncompensated care amount between the
applicable fiscal year (that is, FY 2026 for purposes of this
rulemaking) and FY 2022, where the total uncompensated care amount for
a fiscal year is determined as the product of Factor 1 and Factor 2 for
that year. If the base year amount is equal to or lower than the
hospital's uncompensated care payment for the current fiscal year, then
the hospital would not receive a supplemental payment because the
hospital would not be experiencing financial disruption in that year as
a result of the use of uncompensated care data from the Worksheet S-10
in determining Factor 3 of the uncompensated care payment methodology.
For FY 2026, we are not proposing any changes to the methodology
for determining supplemental payments and we will calculate the
supplemental payments to eligible IHS/Tribal and Puerto Rico hospitals
consistent with the methodology described in the FY 2023 IPPS/LTCH PPS
final rule (87 FR 49047 through 49051) and Sec. 412.106(h).
As discussed in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49048
and 49049), the eligibility and payment processes for the supplemental
payment are consistent with the processes for determining eligibility
to receive interim and final uncompensated care payments adopted in FY
2014 IPPS/LTCH PPS final rule. We note that the MAC will make a final
determination with respect to a hospital's eligibility to receive the
supplemental payment for a fiscal year, in conjunction with its final
determination of the hospital's eligibility for DSH payments and
uncompensated care payments for that fiscal year.
E. Uncompensated Care Payments
As we discussed earlier, section 1886(r)(2) of the Act provides
that, for each eligible hospital in FY 2014 and subsequent years, the
uncompensated care payment is the product of three factors, which are
discussed in the next sections.
1. Proposed Calculation of Factor 1 for FY 2026
Section 1886(r)(2)(A) of the Act establishes Factor 1 in the
calculation of the uncompensated care payment. The regulations located
at 42 CFR 412.106(g)(1)(i) govern the Factor 1 calculation. Under a
prospective payment system, we would not know the precise aggregate
Medicare DSH
[[Page 18256]]
payment amounts that would be paid for a fiscal year until cost report
settlement for all IPPS hospitals is completed, which occurs several
years after the end of the fiscal year. Therefore, section
1886(r)(2)(A)(i) of the Act provides authority to estimate this amount
by specifying that, for each fiscal year to which the provision
applies, such amount is to be estimated by the Secretary. Similarly, we
would not know the precise aggregate empirically justified Medicare DSH
payment amounts that would be paid for a fiscal year until cost report
settlement for all IPPS hospitals is completed. Thus, section
1886(r)(2)(A)(ii) of the Act provides authority to estimate this
amount. In brief, Factor 1 is the difference between the Secretary's
estimates of: (1) the amount that would have been paid in Medicare DSH
payments for the fiscal year, in the absence of section 1886(r) of the
Act; and (2) the amount of empirically justified Medicare DSH payments
that are made for the fiscal year, which takes into account the
requirement to pay 25 percent of what would have otherwise been paid
under section 1886(d)(5)(F) of the Act.
In this FY 2026 IPPS/LTCH PPS proposed rule consistent with the
policy that has applied since the FY 2014 final rule (78 FR 50627
through 50631), we are determining Factor 1 from the most recently
available estimates of the aggregate amount of Medicare DSH payments
that would be made for FY 2026 in the absence of section 1886(r)(1) of
the Act and the aggregate amount of empirically justified Medicare DSH
payments that would be made for FY 2026, both as calculated by CMS'
Office of the Actuary (OACT). Consistent with the policy that has
applied in previous years, these estimates will not be revised or
updated subsequent to publication of our final projections in the FY
2026 IPPS/LTCH PPS final rule.
For this proposed rule, to calculate both estimates, we used the
most recently available projections of Medicare DSH payments for the
fiscal year, as calculated by OACT using the most recently filed
Medicare hospital cost reports with Medicare DSH payment information
and the most recent DPPs and Medicare DSH payment adjustments provided
in the IPPS Impact File. The projection of Medicare DSH payments for
the fiscal year is also partially based on OACT's Part A benefits
projection model, which projects, among other things, inpatient
hospital spending. Projections of DSH payments additionally require
projections of expected increases in utilization and case-mix. The
assumptions that were used in making these inpatient hospital spending,
utilization, and case-mix projections and the resulting estimates of
DSH payments for FY 2023 through FY 2026 are discussed later in this
section and in the table titled ``Factors Applied for FY 2023 through
FY 2026 to Estimate Medicare DSH Expenditures Using FY 2022 Baseline.''
For purposes of calculating Factor 1 and modeling the impact of
this FY 2026 IPPS/LTCH PPS proposed rule, we used OACT's January 2025
Medicare DSH estimates, which were based on data from the December 2024
update of the Medicare Hospital Cost Report Information System (HCRIS)
and the FY 2025 IPPS/LTCH PPS final rule IPPS Impact File, published in
conjunction with the publication of the FY 2025 IPPS/LTCH PPS final
rule. Because SCHs that are projected to be paid under their hospital-
specific rate are ineligible for empirically justified Medicare DSH
payments and uncompensated care payments, they were excluded from the
January 2025 Medicare DSH estimates. Because Maryland hospitals are not
paid under the IPPS, they are also ineligible for empirically justified
Medicare DSH payments and uncompensated care payments and were also
excluded from OACT's January 2025 Medicare DSH estimates.
The 16 hospitals that CMS expects will participate in the Rural
Community Hospital Demonstration Program in FY 2026 were also excluded
from OACT's January 2025 Medicare DSH estimates because under the
payment methodology that applies during the demonstration, these
hospitals are not eligible to receive empirically justified Medicare
DSH payments or uncompensated care payments.
For this proposed rule, using the data sources previously
discussed, OACT's January 2025 estimates of Medicare DSH payments for
FY 2026 without regard to the application of section 1886(r)(1) of the
Act is approximately $15.682 billion. Therefore, also based on OACT's
January 2025 Medicare DSH estimates, the estimate of empirically
justified Medicare DSH payments for FY 2026, with the application of
section 1886(r)(1) of the Act, is approximately $3.92 billion (or 25
percent of the total amount of estimated Medicare DSH payments for FY
2026). Under Sec. 412.106(g)(1)(i), Factor 1 is the difference between
these two OACT estimates. Therefore, in this proposed rule, we are
determining that Factor 1 for FY 2026 would be $11.761 billion, which
is equal to 75 percent of the total amount of estimated Medicare DSH
payments for FY 2026 ($15.682 billion minus $3.92 billion). We note
that consistent with our approach in previous rulemakings, OACT intends
to use more recent data that may become available for purposes of
projecting the final Factor 1 estimates for the FY 2026 IPPS/LTCH PPS
final rule.
We note that the Factor 1 estimates for IPPS/LTCH PPS proposed
rules are generally consistent with the economic assumptions and
actuarial analysis used to develop the President's Budget estimates
under current law, and Factor 1 estimates for IPPS/LTCH PPS final rules
are generally consistent with those used for the Midsession Review of
the President's Budget.\215\ Consistent with historical practice, we
expect the Midsession Review will have updated economic assumptions and
actuarial analysis, which will be used for the development of Factor 1
estimates in the FY 2026 IPPS/LTCH PPS final rule.
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\215\ As we have in the past, for additional information on the
development of the President's Budget, we refer readers to the
Office of Management and Budget website at https://www.whitehouse.gov/omb/budget.
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For a general overview of the principal steps involved in
projecting future inpatient costs and utilization, we refer readers to
the ``2024 Annual Report of the Boards of Trustees of the Federal
Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds,'' available on the CMS website at https://www.cms.gov/oact/tr/2024.\216\ The actuarial projections contained in these reports are
based on numerous assumptions regarding future trends in program
enrollment, utilization and costs of health care services covered by
Medicare, as well as other factors affecting program expenditures. In
addition, although the methods used to estimate future costs based on
these assumptions are complex, they are subject to periodic review by
independent experts to ensure their validity and reasonableness.
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\216\ We note that the annual reports of the Medicare Boards of
Trustees to Congress represent the Federal Government's official
evaluation of the financial status of the Medicare Program.
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In this proposed rule, we include information regarding the data
sources, methods, and assumptions employed by OACT's actuaries in
determining our estimate of Factor 1. In summary, we indicate the
historical HCRIS data update OACT used to estimate Medicare DSH
payments; we explain that the most recent Medicare DSH payment
adjustments provided in the IPPS Impact File were used, and we provide
the components of all the update factors that were applied to the
historical data to estimate the Medicare DSH payments for the upcoming
fiscal year, along with
[[Page 18257]]
the associated rationale and assumptions. The discussion also includes
descriptions of the ``Other'' and ``Discharges'' assumptions.
OACT's estimates for FY 2026 for this proposed rule began with a
baseline of $13.018 billion in Medicare DSH expenditures for FY 2022.
The following table shows the factors applied to update this baseline
through the current estimate for FY 2026:
Factors Applied for FY 2023 Through FY 2026 To Estimate Medicare DSH Expenditures Using FY 2022 Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
IPPS hospital Estimated DSH
FY market basket Discharges Case-mix Other Total payment (in
update factor billions) *
--------------------------------------------------------------------------------------------------------------------------------------------------------
2023.............................................................. 1.043 0.994 0.990 1.0504 1.0784 14.038
2024.............................................................. 1.031 0.998 0.997 1.0310 1.0573 14.842
2025.............................................................. 1.029 0.991 1.005 0.9976 1.0228 15.180
2026 **........................................................... 1.024 0.999 1.005 1.0048 1.0331 15.682
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Rounded.
** The FY 2026 figures reflect the proposed inpatient hospital market basket percentage increase and productivity adjustment and are based on the 4th
quarter 2024 IHS Global Inc. (IGI) forecast, the most recent forecast available at the time of development of this proposed rule.
In this table, the discharges column shows the changes in the
number of Medicare FFS inpatient hospital discharges. The discharge
figures for FY 2023 and FY 2024 are based on Medicare claims data that
have been adjusted by a completion factor to account for incomplete
claims data. The discharge figures for FY 2025 and FY 2026 are
assumptions based on recent historical experience and assumptions
related to how many beneficiaries will be enrolled in MA plans.
The case-mix column shows the estimated change in case-mix for IPPS
hospitals. The case-mix figures for FY 2023 and FY 2024 are based on
actual claims data adjusted by a completion factor to account for
incomplete claims data. The case-mix figures for FY 2025 and for FY
2026 are assumptions based on the 2012 ``Review of Assumptions and
Methods of the Medicare Trustees' Financial Projections'' report by the
2010-2011 Medicare Technical Review Panel.\217\
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\217\ https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/reportstrustfunds/downloads/technicalpanelreport2010-2011.pdf.
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The ``Other'' column reflects the change in other factors that
contribute to the Medicare DSH estimates. These factors include the
difference between the total inpatient hospital discharges and IPPS
discharges and various adjustments to the payment rates that have been
included over the years but are not reflected in the other columns. In
addition, the ``Other'' column includes a factor for the estimated
changes in Medicaid enrollment through FY 2023.
The following table shows the factors that are included in the
``IPPS Hospital Market Basket Update Factor'' column of the previous
table:
----------------------------------------------------------------------------------------------------------------
IPPS hospital market
FY basket percentage Productivity Documentation Total update
increase adjustment and coding percentage
----------------------------------------------------------------------------------------------------------------
2023.................................... 4.1 0.3 0.5 4.3
2024.................................... 3.3 0.2 0.0 3.1
2025.................................... 3.4 0.5 0.0 2.9
2026.................................... 3.2 0.8 0.0 2.4
----------------------------------------------------------------------------------------------------------------
Note: All figures in this table are the final inpatient hospital updates for the applicable fiscal year, except
for the FY 2026 figures. The FY 2026 figures reflect the proposed inpatient hospital market basket percentage
increase and productivity adjustment and are based on the 4th quarter 2024 IGI forecast, the most recent
forecast available at the time of development of this proposed rule. We refer readers to section V.B. of the
preamble of this proposed rule for a complete discussion of the inpatient hospital market basket update for FY
2026.
We are inviting public comments on our proposed Factor 1 for FY
2026.
IV. Proposed Payment Adjustment for Medicare Disproportionate Share
Hospitals (DSHs) for FY 2026 (Sec. 412.106)
2. Calculation of Proposed Factor 2 for FY 2026
a. Background
Section 1886(r)(2)(B) of the Act establishes Factor 2 in the
calculation of the uncompensated care payment. Section
1886(r)(2)(B)(ii) of the Act provides that, for FY 2018 and subsequent
fiscal years, the second factor is 1 minus the percent change in the
percent of individuals who are uninsured, as determined by comparing
the percent of individuals who were uninsured in 2013 (as estimated by
the Secretary, based on data from the Census Bureau or other sources
the Secretary determines appropriate, and certified by the Chief
Actuary of CMS) and the percent of individuals who were uninsured in
the most recent period for which data are available (as so estimated
and certified).
We are continuing to use the methodology that was used in FY 2018
through FY 2025 to determine Factor 2 for FY 2026--to use the National
Health Expenditure Accounts (NHEA) data to determine the percent change
in the percent of individuals who are uninsured. We refer readers to
the FY 2018 IPPS/LTCH PPS final rule (82 FR 38197 and 38198) for a
complete discussion of the NHEA and why we determined, and continue to
believe, that it is the data source for the rate of uninsurance that,
on balance, best meets all our considerations and is consistent with
the statutory requirement that the estimate of the rate of uninsurance
be based on data from the Census Bureau or other sources the Secretary
determines appropriate.
[[Page 18258]]
In brief, the NHEA represents the government's official estimates
of economic activity (spending) within the health sector. The NHEA
includes comprehensive enrollment estimates for total private health
insurance (PHI) (including direct-purchase and employer-sponsored
plans), Medicare, Medicaid, the Children's Health Insurance Program
(CHIP), and other public programs, and estimates of the number of
individuals who are uninsured. The NHEA data are publicly available on
the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html.
To compute Factor 2 for FY 2026, the first metric that is needed is
the proportion of the total U.S. population that was uninsured in 2013.
For a complete discussion of the approach OACT used to prepare the
NHEA's estimate of the rate of uninsurance in 2013, including the data
sources used, we refer readers to the FY 2024 IPPS/LTCH PPS final rule
(88 FR 58998-58999).
The next metrics needed to compute Factor 2 for FY 2026 are
projections of the rate of uninsurance in both CY 2025 and CY 2026 for
the total U.S. population. On an annual basis, OACT projects enrollment
and spending trends for the coming 10-year period. The most recent
projections are for 2023 through 2032 and were published on June 12,
2024. Those projections used the latest NHEA historical data that were
available at the time of their construction (that is, historical data
through 2022). The NHEA projection methodology accounts for expected
changes in enrollment across all of the categories of insurance
coverage previously listed. For a complete discussion of how the NHEA
data account for expected changes in enrollment across all the
categories of insurance coverage previously listed, we refer readers to
the FY 2024 IPPS/LTCH PPS final rule (88 FR 58999).
b. Proposed Factor 2 for FY 2026
Using these data sources and the previously described
methodologies, at the time of developing this proposed rule, OACT has
estimated that the uninsured rate for the historical, baseline year of
2013 was 14 percent, and that the uninsured rates for CYs 2025 and 2026
were 7.7 percent and 8.7 percent, respectively. As required by section
1886(r)(2)(B)(ii) of the Act, the Chief Actuary of CMS certified these
estimates. We refer readers to OACT's Memorandum on Certification of
Rates of Uninsured prepared for this FY 2026 IPPS/LTCH PPS proposed
rule for further details on the methodology and assumptions that were
used in the projection of these rates of uninsurance.\218\
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\218\ https://www.cms.gov/files/document/certification-rates-uninsured-2026-proposed-rule.pdf.
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As with the CBO estimates on which we based Factor 2 for fiscal
years before FY 2018, the NHEA estimates are for a calendar year. Under
the approach originally adopted in the FY 2014 IPPS/LTCH PPS final
rule, we use a weighted average approach to project the rate of
uninsurance for each fiscal year. We continue to believe that, in order
to estimate the rate of uninsurance during a fiscal year accurately,
Factor 2 should reflect the estimated rate of uninsurance that
hospitals will experience during the fiscal year, rather than the rate
of uninsurance during only one of the calendar years that the fiscal
year spans. Accordingly, in this FY 2026 IPPS/LTCH PPS proposed rule,
we are continuing to apply the weighted average approach used in past
fiscal years to estimate this proposed rule's rate of uninsurance for
FY 2026.
OACT certified the estimate of the rate of uninsurance for FY 2026
determined using this weighted average approach to be reasonable and
appropriate for purposes of section 1886(r)(2)(B)(ii) of the Act. We
note that we may also consider the use of more recent data that may
become available for purposes of estimating the rates of uninsurance
used in the calculation of the final Factor 2 for FY 2026. The
calculation of the proposed Factor 2 for FY 2026 is as follows:
Percent of individuals without insurance for CY 2013: 14
percent.
Percent of individuals without insurance for CY 2025: 7.7
percent.
Percent of individuals without insurance for CY 2026: 8.7
percent.
Percent of individuals without insurance for FY 2026:
(0.25 times 0.077) + (0.75 times 0.087) = 8.5 percent.
FY 2026's proposed Factor 2 is calculated as 1 minus the
percent change in the percent of individuals without insurance between
CY 2013 and FY 2026.
Proposed Factor 2 is as follows: 1-[verbar]((0.14-0.085)/
0.14)[verbar] = 1-0.3929 = 0.6071.
We are proposing that Factor 2 for FY 2026 would be 60.71 percent.
The proposed FY 2026 uncompensated care amount is equivalent to
proposed Factor 1 multiplied by proposed Factor 2, which is
$7,140,406,650.
We are inviting public comments on our proposed Factor 2 for FY
2026.
3. Calculation of Proposed Factor 3 for FY 2026
a. General Background
Section 1886(r)(2)(C) of the Act defines Factor 3 in the
calculation of the uncompensated care payment. As we have discussed
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal
to the percent, for each subsection (d) hospital, that represents the
quotient of: (1) the amount of uncompensated care for such hospital for
a period selected by the Secretary (as estimated by the Secretary,
based on appropriate data (including, in the case where the Secretary
determines alternative data are available that are a better proxy for
the costs of subsection (d) hospitals for treating the uninsured, the
use of such alternative data)); and (2) the aggregate amount of
uncompensated care for all subsection (d) hospitals that receive a
payment under section 1886(r) of the Act for such period (as so
estimated, based on such data).
Therefore, Factor 3 is a hospital-specific value that expresses the
proportion of the estimated uncompensated care amount for each
subsection (d) hospital and each subsection (d) Puerto Rico hospital
with the potential to receive Medicare DSH payments relative to the
estimated uncompensated care amount for all hospitals estimated to
receive Medicare DSH payments in the fiscal year for which the
uncompensated care payment is to be made. Factor 3 is applied to the
product of Factor 1 and Factor 2 to determine the amount of the
uncompensated care payment that each eligible hospital will receive for
FY 2014 and subsequent fiscal years. In order to implement the
statutory requirements for this factor of the uncompensated care
payment formula, it was necessary for us to determine: (1) the
definition of uncompensated care or, in other words, the specific items
that are to be included in the numerator (that is, the estimated
uncompensated care amount for an individual hospital) and the
denominator (that is, the estimated uncompensated care amount for all
hospitals estimated to receive Medicare DSH payments in the applicable
fiscal year); (2) the data source(s) for the estimated uncompensated
care amount; and (3) the timing and manner of computing the quotient
for each hospital estimated to receive Medicare DSH payments. The
statute instructs the Secretary to estimate the amounts of
uncompensated care for a period based
[[Page 18259]]
on appropriate data. In addition, we note that the statute permits the
Secretary to use alternative data in the case where the Secretary
determines that such alternative data are available that are a better
proxy for the costs of subsection (d) hospitals for treating
individuals who are uninsured. For a discussion of the methodology, we
used to calculate Factor 3 for fiscal years 2014 through 2022, we refer
readers to the FY 2024 IPPS/LTCH final rule (88 FR 59001 and 59002).
b. Background on the Methodology Used To Calculate Factor 3 for FY 2024
and Subsequent Years
Section 1886(r)(2)(C) of the Act governs the selection of the data
to be used in calculating Factor 3 and allows the Secretary the
discretion to determine the time periods from which we will derive the
data to estimate the numerator and the denominator of the Factor 3
quotient. Specifically, section 1886(r)(2)(C)(i) of the Act defines the
numerator of the quotient as the amount of uncompensated care for a
subsection (d) hospital for a period selected by the Secretary. Section
1886(r)(2)(C)(ii) of the Act defines the denominator as the aggregate
amount of uncompensated care for all subsection (d) hospitals that
receive a payment under section 1886(r) of the Act for such period. In
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50634 through 50647), we
adopted a process of making interim payments with final cost report
settlement for both the empirically justified Medicare DSH payments and
the uncompensated care payments required by section 3133 of the
Affordable Care Act. Consistent with that process, we also determined
the time period from which to calculate the numerator and denominator
of the Factor 3 quotient in a way that would be consistent with making
interim and final payments. Specifically, we must have Factor 3 values
available for hospitals that we estimate will qualify for Medicare DSH
payments for a fiscal year and for those hospitals that we do not
estimate will qualify for Medicare DSH payments for that fiscal year
but that may ultimately qualify for Medicare DSH payments for that
fiscal year at the time of cost report settlement.
As described in the FY 2022 IPPS/LTCH PPS final rule, commenters
expressed concerns that the use of only 1 year of data to determine
Factor 3 would lead to significant variations in year-to-year
uncompensated care payments. Some stakeholders recommended the use of 2
years of historical data from Worksheet S-10 data of the Medicare cost
report (86 FR 45237). In the FY 2022 IPPS/LTCH PPS final rule, we
stated that we would consider using multiple years of data when the
vast majority of providers had been audited for more than 1 fiscal year
under the revised reporting instructions. Audited FY 2020 cost reports
were available for the development of the FY 2024 IPPS/LTCH PPS
proposed and final rules. Feedback from previous audits and lessons
learned were incorporated into the audit process for the FY 2020
reports.
In consideration of the comments discussed in the FY 2022 IPPS/LTCH
PPS final rule, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49036
through 49047), we finalized a policy of using a multi-year average of
audited Worksheet S-10 data to determine Factor 3 for FY 2023 and
subsequent fiscal years. We explained our belief that this approach
would be generally consistent with our past practice of using the most
recent single year of audited data from the Worksheet S-10, while also
addressing commenters' concerns regarding year-to-year fluctuations in
uncompensated care payments. Under this policy, we used a 2-year
average of audited FY 2018 and FY 2019 Worksheet S-10 data to calculate
Factor 3 for FY 2023. We also indicated that we expected FY 2024 would
be the first year that 3 years of audited data would be available at
the time of rulemaking. For FY 2024 and subsequent fiscal years, we
finalized a policy of using a 3-year average of the uncompensated care
data from the 3 most recent fiscal years for which audited data are
available to determine Factor 3. Consistent with the approach that we
followed when multiple years of data were previously used in the Factor
3 methodology, if a hospital does not have data for all 3 years used in
the Factor 3 calculation, we will determine Factor 3 based on an
average of the hospital's available data. For IHS and Tribal hospitals
and Puerto Rico hospitals, we use the same multi-year average of
Worksheet S-10 data to determine Factor 3 for FY 2024 and subsequent
fiscal years as is used to determine Factor 3 for all other DSH-
eligible hospitals (in other words, hospitals eligible to receive
empirically justified Medicare DSH payments for a fiscal year) to
determine Factor 3.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49033 through
49047), we also modified our policy regarding cost reports that start
in one fiscal year and span the entirety of the following fiscal year.
Specifically, in the rare cases when we use a cost report that starts
in one fiscal year and spans the entirety of the subsequent fiscal year
to determine uncompensated care costs for the subsequent fiscal year,
we would not use the same cost report to determine the hospital's
uncompensated care costs for the earlier fiscal year. We explained that
using the same cost report to determine uncompensated care costs for
both fiscal years would not be consistent with our intent to smooth
year-to-year variation in uncompensated care costs. As an alternative,
we finalized our proposal to use the hospital's most recent prior cost
report, if that cost report spans the applicable period.\219\
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\219\ For example, in determining Factor 3 for FY 2023, we did
not use the same cost report to determine a hospital's uncompensated
care costs for both FY 2018 and FY 2019. Rather, we used the cost
report that spanned the entirety of FY 2019 to determine
uncompensated care costs for FY 2019 and used the hospital's most
recent prior cost report to determine its uncompensated care costs
for FY 2018, provided that cost report spanned some portion of FY
2018.
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(1) Scaling Factor
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69323), we continued
the policy finalized in the FY 2023 IPPS/LTCH PPS final rule (87 FR
49042) to address the effects of calculating Factor 3 using data from
multiple fiscal years, in which we apply a scaling factor to the Factor
3 values calculated for all DSH-eligible hospitals so that total
uncompensated care payments to hospitals that are projected to be DSH-
eligible for a fiscal year will be consistent with the estimated amount
available to make uncompensated care payments for that fiscal year.
Pursuant to that policy, we divide 1 (the expected sum of all DSH-
eligible hospitals' Factor 3 values) by the actual sum of all DSH-
eligible hospitals' Factor 3 values and then multiply the quotient by
the uncompensated care payment determined for each DSH-eligible
hospital to obtain a scaled uncompensated care payment amount for each
hospital. This process is designed to ensure that the sum of the scaled
uncompensated care payments for all hospitals that are projected to be
DSH-eligible is consistent with the estimate of the total amount
available to make uncompensated care payments for the applicable fiscal
year.
(2) New Hospital Policy for Purposes of Factor 3
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69323), we continued
our new hospital policy that was modified in the FY 2023 IPPS/LTCH PPS
final rule (87 FR 49042) and initially adopted in the FY 2020 IPPS/LTCH
PPS final rule (84 FR 42370 through 42371) to determine Factor 3 for
new hospitals. Consistent with our policy of using
[[Page 18260]]
multiple years of cost reports to determine Factor 3, we defined new
hospitals as hospitals that do not have cost report data for the most
recent year of data being used in the Factor 3 calculation. Under this
definition, the cut-off date for the new hospital policy is the
beginning of the fiscal year after the most recent year for which
audits of the Worksheet S-10 data have been conducted. For FY 2026, the
FY 2022 cost reports are the most recent year of cost reports for which
audits of Worksheet S-10 data have been conducted. Thus, hospitals with
CMS Certification Numbers (CCNs) established on or after October 1,
2022, would be subject to the new hospital policy for FY 2026.
Under our modified new hospital policy, if a new hospital has a
preliminary projection of being DSH-eligible based on its most recent
available disproportionate patient percentage, it may receive interim
empirically justified DSH payments. However, new hospitals will not
receive interim uncompensated care payments because we would have no
uncompensated care data on which to determine what those interim
payments should be. The MAC will make a final determination concerning
whether the hospital is eligible to receive Medicare DSH payments at
cost report settlement. In FY 2025, while we continued to determine the
numerator of the Factor 3 calculation using the new hospital's
uncompensated care costs reported on Worksheet S-10 of the hospital's
cost report for the current fiscal year, we determined Factor 3 for new
hospitals using a denominator based solely on uncompensated care costs
from cost reports for the most recent fiscal year for which audits have
been conducted. In addition, we applied a scaling factor to the Factor
3 calculation for a new hospital.\220\
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\220\ In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49042), we
explained our belief that applying the scaling factor is appropriate
for purposes of calculating Factor 3 for all hospitals, including
new hospitals and hospitals that are treated as new hospitals, to
improve consistency and predictability across all hospitals.
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(3) Newly Merged Hospital Policy
In the FY 2025 IPPS/LTCH PPS final rule (89 FR 690323 through
690324), we continued our policy of treating hospitals that merge after
the development of the final rule for the applicable fiscal year
similar to new hospitals. As explained in the FY 2015 IPPS/LTCH PPS
final rule (79 FR 50021), for these newly merged hospitals, we do not
have data currently available to calculate a Factor 3 amount that
accounts for the merged hospital's uncompensated care burden. In the FY
2015 IPPS/LTCH PPS final rule (79 FR 50021 and 50022), we finalized a
policy under which Factor 3 for hospitals that we do not identify as
undergoing a merger until after the public comment period and
additional review period following the publication of the final rule or
that undergo a merger during the fiscal year will be recalculated
similar to new hospitals.
Consistent with the policy adopted in the FY 2015 IPPS/LTCH PPS
final rule, in the FY 2025 IPPS/LTCH PPS final rule (89 FR 690323
through 690324), we stated that we would continue to treat newly merged
hospitals in a similar manner to new hospitals, such that the newly
merged hospital's final uncompensated care payment will be determined
at cost report settlement where the numerator of the newly merged
hospital's Factor 3 will be based on the cost report of only the
surviving hospital (that is, the newly merged hospital's cost report)
for the current fiscal year. However, if the hospital's cost reporting
period includes less than 12 months of data, the data from the newly
merged hospital's cost report will be annualized for purposes of the
Factor 3 calculation. Consistent with the methodology used to determine
Factor 3 for new hospitals described in section IV.E.3. of the preamble
of this proposed rule, we continued our policy for determining Factor 3
for newly merged hospitals using a denominator that is the sum of the
uncompensated care costs for all DSH-eligible hospitals, as reported on
Worksheet S-10 of their cost reports for the most recent fiscal year
for which audits have been conducted. In addition, we apply a scaling
factor, as discussed in section IV.E.3. of the preamble of this
proposed rule, to the Factor 3 calculation for a newly merged hospital.
In the FY 2025 IPPS/LTCH PPS final rule, we explained that consistent
with past policy, interim uncompensated care payments for the newly
merged hospital would be based only on the data for the surviving
hospital's CCN available at the time of the development of the final
rule.
(4) CCR Trim Methodology
The calculation of a hospital's total uncompensated care costs on
Worksheet S-10 requires the use of the hospital's cost to charge ratio
(CCR). In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69324), we
continued the policy of trimming CCRs, which we adopted in the FY 2023
IPPS/LTCH PPS final rule (87 FR 49043), for FY 2025. Under this policy,
we apply the following steps to determine the applicable CCR separately
for each fiscal year that is included as part of the multi-year average
used to determine Factor 3:
Step 1: Remove Maryland hospitals. In addition, we will remove all-
inclusive rate providers because their CCRs are not comparable to the
CCRs calculated for other IPPS hospitals.
Step 2: Calculate a CCR ``ceiling'' for the applicable fiscal year
with the following data: for each IPPS hospital that was not removed in
Step 1 (including hospitals that are not DSH-eligible), we use cost
report data to calculate a CCR by dividing the total costs on Worksheet
C, Part I, Line 202, Column 3 by the charges reported on Worksheet C,
Part I, Line 202, Column 8. (Combining data from multiple cost reports
from the same fiscal year is not necessary, as the longer cost report
will be selected.) The ceiling is calculated as 3 standard deviations
above the national geometric mean CCR for the applicable fiscal year.
This approach is consistent with the methodology for calculating the
CCR ceiling used for high-cost outliers. Remove all hospitals that
exceed the ceiling so that these aberrant CCRs do not skew the
calculation of the statewide average CCR.
Step 3: Using the CCRs for the remaining hospitals in Step 2,
determine the urban and rural statewide average CCRs for the applicable
fiscal year for hospitals within each State (including hospitals that
are not DSH-eligible), weighted by the sum of total hospital discharges
from Worksheet S-3, Part I, Line 14, Column 15.
Step 4: Assign the appropriate statewide average CCR (urban or
rural) calculated in Step 3 to all hospitals, excluding all-inclusive
rate providers, with a CCR for the applicable fiscal year greater than
3 standard deviations above the national geometric mean for that fiscal
year (that is, the CCR ``ceiling'').
Step 5: For hospitals that did not report a CCR on Worksheet S-10,
Line 1, we assign them the statewide average CCR for the applicable
fiscal year as determined in step 3.
After completing these steps, we re-calculate the hospital's
uncompensated care costs (Line 30) for the applicable fiscal year using
the trimmed CCR (the statewide average CCR (urban or rural, as
applicable)).
(5) Uncompensated Care Data Trim Methodology
After applying the CCR trim methodology, there are rare situations
where a hospital has potentially aberrant uncompensated care data for a
fiscal year that are unrelated to its CCR. Therefore, under the trim
methodology for potentially aberrant uncompensated
[[Page 18261]]
care costs (UCC) that was included as part of the methodology for
purposes of determining Factor 3 in the FY 2021 IPPS/LTCH PPS final
rule (85 FR 58832), if the hospital's uncompensated care costs for any
fiscal year that is included as a part of the multi-year average are an
extremely high ratio (greater than 50 percent) of its total operating
costs in the applicable fiscal year, we will determine the ratio of
uncompensated care costs to the hospital's total operating costs from
another available cost report, and apply that ratio to the total
operating expenses for the potentially aberrant fiscal year to
determine an adjusted amount of uncompensated care costs for the
applicable fiscal year.\221\
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\221\ For example, if a hospital's FY 2018 cost report is
determined to include potentially aberrant data, data from its FY
2019 cost report would be used for the ratio calculation.
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However, we note that we have audited the Worksheet S-10 data that
will be used in the Factor 3 calculation for a number of hospitals.
Because the UCC data for these hospitals have been subject to audit, we
believe that there is increased confidence that if high uncompensated
care costs are reported by these audited hospitals, the information is
accurate. Therefore, as we explained in the FY 2021 IPPS/LTCH PPS final
rule (85 FR 58832), we determined it is unnecessary to apply the UCC
trim methodology for a fiscal year for which a hospital's UCC data have
been audited.
In rare cases, hospitals that are not currently projected to be
DSH-eligible and that do not have audited Worksheet S-10 data may have
a potentially aberrant amount of insured patients' charity care costs
(line 23 column 2). In the FY 2025 IPPS/LTCH PPS final rule (89 FR
69324 through 69325), we stated that in addition to the UCC trim
methodology, we will continue to apply an alternative trim specific to
certain hospitals that do not have audited Worksheet S-10 data for one
or more of the fiscal years that are used in the Factor 3 calculation.
For FY 2023 and subsequent fiscal years, in the rare case that a
hospital's insured patients' charity care costs for a fiscal year are
greater than $7 million and the ratio of the hospital's cost of insured
patient charity care (line 23 column 2) to total uncompensated care
costs (line 30) is greater than 60 percent, we will not calculate a
Factor 3 for the hospital at the time of proposed or final rulemaking.
This trim will only impact hospitals that are not currently projected
to be DSH-eligible; and therefore, are not part of the calculation of
the denominator of Factor 3, which includes only uncompensated care
costs for hospitals projected to be DSH-eligible. Consistent with the
approach adopted in the FY 2022 IPPS/LTCH PPS final rule, if a hospital
would be trimmed under both the UCC trim methodology and this
alternative trim, we will apply this trim in place of the existing UCC
trim methodology. We continue to believe this alternative trim more
appropriately addresses potentially aberrant insured patient charity
care costs compared to the UCC trim methodology, because the UCC trim
is based solely on the ratio of total uncompensated care costs to total
operating costs and does not consider the level of insured patients'
charity care costs.
Similar to the approach initially adopted in the FY 2022 IPPS/LTCH
PPS final rule (86 FR 45245 and 45246), in the FY 2025 IPPS/LTCH PPS
final rule (89 FR 69324), we also stated that we would continue to use
a threshold of 3 standard deviations from the mean ratio of insured
patients' charity care costs to total uncompensated care costs (line 23
column 2 divided by line 30) and a dollar threshold that is the median
total uncompensated care cost reported on most recent audited cost
reports for hospitals that are projected to be DSH-eligible. We stated
that we continued to believe these thresholds are appropriate to
address potentially aberrant data. We also continued to include
Worksheet S-10 data from IHS/Tribal hospitals and Puerto Rico hospitals
consistent with our policy finalized in the FY 2023 IPPS/LTCH PPS final
rule (87 FR 49047 through 49051). In addition, we continued our policy
adopted in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49044) of
applying the same threshold amounts originally calculated for the FY
2019 reports to identify potentially aberrant data for FY 2025 and
subsequent fiscal years to facilitate transparency and predictability.
If a hospital subject to this trim is determined to be DSH-eligible at
cost report settlement, the MAC will calculate the hospital's Factor 3
using the same methodology used to calculate Factor 3 for new
hospitals.
c. Methodology for Calculating Factor 3 for FY 2026
For FY 2026, consistent with Sec. 412.106(g)(1)(iii)(C)(11), we
are following the same methodology as applied in FY 2024 and described
in the previous section of the preamble of this proposed rule to
determine Factor 3 using the most recent 3 years of audited cost
reports, from FY 2020, FY 2021, and FY 2022. Consistent with our
approach for FY 2025, for FY 2026, we are also applying the scaling
factor, new hospital, newly merged hospital, CCR trim methodology, UCC
trim, and alternative trim methodology policies discussed in the
previous section of the preamble of this proposed rule. For purposes of
the FY 2026 IPPS/LTCH PPS proposed rule, we are using reports from the
December 2024 HCRIS extract to calculate Factor 3. We intend to use the
March 2025 update of HCRIS to calculate the final Factor 3 for the FY
2026 IPPS/LTCH PPS final rule.
Thus, for FY 2026, we will use 3 years of audited Worksheet S-10
Part 1 data to calculate Factor 3 for all eligible hospitals, including
IHS and Tribal hospitals and Puerto Rico hospitals that have a cost
report for 2013, following the below steps. We note that we are
clarifying in these steps our use of Worksheet S-10, Part I, rather
than Worksheet S-10, Part II, to calculate Factor 3.
Step 1: Select the hospital's longest cost report for each of the
most recent 3 years of fiscal year (FY) audited cost reports (FY 2020,
FY 2021, and FY 2022). Alternatively, in the rare case when the
hospital has no cost report for a particular year because the cost
report for the previous fiscal year spanned the more recent fiscal
year, the previous fiscal year cost report will be used in this step.
In the rare case that using a previous fiscal year cost report results
in a period without a report, we would use the prior year report, if
that cost report spanned the applicable period.\222\ In general, we
note that, for purposes of the Factor 3 methodology, references to a
fiscal year cost report are to the cost report that spans the relevant
fiscal year.
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\222\ For example, if a hospital does not have a FY 2020 cost
report because the hospital's FY 2019 cost report spanned the FY
2020 time period, we will use the FY 2019 cost report that spanned
the FY 2020 time period for this step. Using the same example, where
the hospital's FY 2019 report is used for the FY 2020 time period,
we will use the hospital's FY 2018 report if it spans some of the FY
2019 time period. We will not use the same cost report for both the
FY 2020 and the FY 2019 time periods.
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Step 2: Annualize the UCC from Worksheet S-10, Part I, Line 30, if
a cost report is more than or less than 12 months. (If applicable, use
the statewide average CCR (urban or rural) to calculate uncompensated
care costs.)
Step 3: Combine adjusted and/or annualized uncompensated care costs
for hospitals that merged using the merger policy.
Step 4: Calculate Factor 3 for all DSH-eligible hospitals using
annualized uncompensated care costs (Worksheet S-10, Part I, Line 30)
based on cost report data from the most recent 3 years
[[Page 18262]]
of audited cost reports (from Step 1, 2 or 3). New hospitals and other
hospitals that are treated as if they are new hospitals for purposes of
Factor 3 are excluded from this calculation.
Step 5: Average the Factor 3 values from Step 4; that is, add the
Factor 3 values, and divide that amount by the number of cost reporting
periods with data to compute an average Factor 3 for the hospital.
Multiply by a scaling factor, as discussed in the previous section of
the preamble of this proposed rule.
As we explained previously in this section, for FY 2026, we are
also applying the scaling factor, new hospital, newly merged hospital,
CCR trim methodology, UCC trim, and alternative trim methodology
policies discussed in the previous section of the preamble of this
proposed rule. For a hospital that is subject to either of the trims
for potentially aberrant data (the UCC trim and alternative trim
methodology explained in the previous section of the preamble of this
proposed rule) and is ultimately determined to be DSH-eligible at cost
report settlement, its uncompensated care payment will be calculated
only after the hospital's reporting of insured charity care costs on
its FY 2026 Worksheet S-10 has been reviewed. Accordingly, the MAC will
calculate a Factor 3 for the hospital only after reviewing the
uncompensated care information reported on Worksheet S-10 of the
hospital's FY 2026 cost report. Then we will calculate Factor 3 for the
hospital using the same methodology used to determine Factor 3 for new
hospitals. Specifically, the numerator will reflect the uncompensated
care costs reported on the hospital's FY 2026 cost report, while the
denominator will reflect the sum of the uncompensated care costs
reported on Worksheet S-10 of the FY 2022 cost reports of all DSH-
eligible hospitals. In addition, we will apply a scaling factor, as
discussed previously, to the Factor 3 calculation for the hospital.
Under the CCR trim methodology, for purposes of this proposed rule,
the statewide average CCR was applied to 8 hospitals' FY 2020 reports,
of which 2 hospitals had FY 2020 Worksheet S-10 data. The statewide
average CCR was applied to 10 hospitals' FY 2021 reports, of which 4
hospitals had FY 2021 Worksheet S-10 data. The statewide average CCR
was applied to 8 hospitals' FY 2022 reports, of which 2 hospitals had
FY 2022 Worksheet S-10 data.
For purposes of the FY 2026 IPPS/LTCH PPS final rule, consistent
with our Factor 3 methodology since the FY 2014 IPPS/LTCH PPS final
rule (78 FR 50642), we intend to use data from the March 2025 HCRIS
extract for this calculation, which would be the latest quarterly HCRIS
extract that is publicly available at the time of the development of
the FY 2026 IPPS/LTCH PPS final rule.
Regarding requests from providers to amend and/or reopen previously
audited Worksheet S-10 data for the most recent 3 cost reporting years
that are used in the methodology for calculating Factor 3, we note that
MACs follow normal timelines and procedures. For purposes of the Factor
3 calculation for the FY 2026 IPPS/LTCH PPS final rule, any amended
reports and/or reopened reports would need to have completed the
amended report and/or reopened report submission processes by the end
of March 2025. In other words, if the amended report and/or reopened
report is not available for the March HCRIS extract, then that amended
and/or reopened report data would not be part of the FY 2026 IPPS/LTCH
PPS final rule's Factor 3 calculation. We note that the March HCRIS
data extract will be available during the comment period for this
proposed rule if providers want to verify that their amended and/or
reopened data is reflected in the March HCRIS extract.
d. Per-Discharge Amount of Interim Uncompensated Care Payments for FY
2026
Since FY 2014, we have made interim uncompensated care payments
during the fiscal year on a per-discharge basis. Typically, we use a 3-
year average of the number of discharges for a hospital to produce an
estimate of the amount of the hospital's uncompensated care payment per
discharge. Specifically, the hospital's total uncompensated care
payment amount for the applicable fiscal year is divided by the
hospital's historical 3-year average of discharges computed using the
most recent available data to determine the uncompensated care payment
per discharge for that fiscal year.
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69328-
69329), we finalized a policy to use a 3-year average of the most
recent years of available historical discharge data to calculate a per-
discharge payment amount that would be used to make interim
uncompensated care payments to each projected DSH-eligible hospital
during FY 2026 and subsequent fiscal years, codified at 42 CFR
412.106(i)(1). We are applying this policy for FY 2026. Interim
uncompensated care payments made to a hospital during the fiscal year
are reconciled following the end of the year to ensure that the final
payment amount is consistent with the hospital's prospectively
determined uncompensated care payment for the fiscal year.
As we explained in the FY 2025 IPPS/LTCH PPS final rule (89 FR
69329 through 69330), we also finalized a voluntary process in the FY
2021 IPPS/LTCH PPS final rule (85 FR 58833 and 58834), through which a
hospital may submit a request to its MAC for a lower per-discharge
interim uncompensated care payment amount, including a reduction to
zero, once before the beginning of the fiscal year and/or once during
the fiscal year. In conjunction with this request, the hospital must
provide supporting documentation demonstrating that there would likely
be a significant recoupment at cost report settlement if the per-
discharge amount is not lowered (for example, recoupment of 10 percent
or more of the hospital's total uncompensated care payment, or at least
$100,000). For example, a hospital might submit documentation showing a
large projected increase in discharges during the fiscal year to
support reduction of its per-discharge uncompensated care payment
amount. As another example, a hospital might request that its per-
discharge uncompensated care payment amount be reduced to zero midyear
if the hospital's interim uncompensated care payments during the year
have already surpassed the total uncompensated care payment calculated
for the hospital.
Under the policy we finalized in the FY 2021 IPPS/LTCH PPS final
rule (85 FR 58833 through 58834), the hospital's MAC will evaluate
these requests and the supporting documentation before the beginning of
the fiscal year and/or with midyear requests when the historical
average number of discharges is lower than the hospital's projected
discharges for the current fiscal year. If, following review of the
request and the supporting documentation, the MAC agrees that there
likely would be significant recoupment of the hospital's interim
Medicare uncompensated care payments at cost report settlement, the
only change that will be made is to lower the per-discharge amount
either to the amount requested by the hospital or another amount
determined by the MAC to be appropriate to reduce the likelihood of a
substantial recoupment at cost report settlement. If the MAC determines
it would be appropriate to reduce the interim Medicare uncompensated
care payment per-discharge amount, that updated amount will be used for
purposes of the outlier payment calculation for the remainder of the
fiscal year. We are continuing to
[[Page 18263]]
apply this policy for FY 2026. We refer readers to the Addendum in the
FY 2023 IPPS/LTCH final rule for a more detailed discussion of the
steps for determining the operating and capital Federal payment rate
and the outlier payment calculation (87 FR 49431 through 49432). No
change would be made to the total uncompensated care payment amount
determined for the hospital on the basis of its Factor 3. In other
words, any change to the per-discharge uncompensated care payment
amount will not change how the total uncompensated care payment amount
will be reconciled at cost report settlement.
e. Process for Notifying CMS of Merger Updates and To Report Upload
Issues
As we have done for every proposed and final rule beginning in FY
2014, in conjunction with this proposed rule, we will publish on the
CMS website a table listing Factor 3 for hospitals that we estimate
will receive empirically justified Medicare DSH payments in FY 2026
(that is, those hospitals that will receive interim uncompensated care
payments during the fiscal year), and for the remaining subsection (d)
hospitals and subsection (d) Puerto Rico hospitals that have the
potential of receiving an uncompensated care payment in the event that
they receive an empirically justified Medicare DSH payment for the
fiscal year as determined at cost report settlement. However, we note
that a Factor 3 will not be published for new hospitals and hospitals
that are subject to the alternative trim for hospitals with potentially
aberrant data that are not projected to be DSH-eligible.
We will also publish a supplemental data file containing a list of
the mergers that we are aware of and the computed uncompensated care
payment for each merged hospital. In the DSH uncompensated care
supplemental data file, we list new hospitals and the 8 hospitals that
would be subject to the alternative trim for hospitals with potentially
aberrant data that are not projected to be DSH-eligible, with a N/A in
the Factor 3 column.
Hospitals have 60 days from the date of public display of the FY
2026 IPPS/LTCH PPS proposed rule in the Federal Register to review the
table and supplemental data file published on the CMS website in
conjunction with this proposed rule and to notify CMS in writing of
issues related to mergers and/or to report potential upload
discrepancies due to MAC mishandling of Worksheet S-10 data during the
report submission process.\223\ Comments raising issues or concerns
that are specific to the information included in the table and
supplemental data file should be submitted by email to the CMS inbox at
[email protected]. We will address comments related to mergers
and/or reporting upload discrepancies submitted to the CMS DSH inbox as
appropriate in the table and the supplemental data file that we publish
on the CMS website in conjunction with the publication of the FY 2026
IPPS/LTCH PPS final rule. All other comments submitted in response to
our proposals for FY 2026 must be submitted in one of the three ways
found in the ADDRESSES section of the proposed rule before the close of
the comment period in order to be assured consideration. In addition,
we note that the CMS DSH inbox is not intended for Worksheet S-10 audit
process related emails, which should be directed to the MACs.
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\223\ For example, if the report does not reflect audit results
due to MAC mishandling, or the most recent report differs from a
previously accepted, amended report due to MAC mishandling.
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VI. Other Proposed Decisions and Changes to the IPPS for Operating
Costs
A. Proposed Changes to MS-DRGs Subject to Postacute Care Transfer
Policy and MS-DRG Special Payments Policies (Sec. 412.4)
1. Background
Existing regulations at 42 CFR 412.4(a) define discharges under the
IPPS as situations in which a patient is formally released from an
acute care hospital or dies in the hospital. Section 412.4(b) defines
acute care transfers, and Sec. 412.4(c) defines postacute care
transfers. Our policy set forth in Sec. 412.4(f) provides that when a
patient is transferred and his or her length of stay is less than the
geometric mean length of stay for the MS-DRG to which the case is
assigned, the transferring hospital is generally paid based on a
graduated per diem rate for each day of stay, not to exceed the full
MS-DRG payment that would have been made if the patient had been
discharged without being transferred.
The per diem rate paid to a transferring hospital is calculated by
dividing the full MS-DRG payment by the geometric mean length of stay
for the MS-DRG. Based on an analysis that showed that the first day of
hospitalization is the most expensive (60 FR 45804), our policy
generally provides for payment that is twice the per diem amount for
the first day, with each subsequent day paid at the per diem amount up
to the full MS-DRG payment (Sec. 412.4(f)(1)). Transfer cases also are
eligible for outlier payments. In general, the outlier threshold for
transfer cases, as described in Sec. 412.80(b), is equal to (Fixed-
Loss Outlier threshold for Nontransfer Cases adjusted for geographic
variations in costs/Geometric Mean Length of Stay for the MS-DRG) *
(Length of Stay for the Case plus 1 day).
We established the criteria set forth in Sec. 412.4(d) for
determining which DRGs qualify for postacute care transfer payments in
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The
determination of whether a DRG is subject to the postacute care
transfer policy was initially based on the Medicare Version 23.0
GROUPER (FY 2006) and data from the FY 2004 MedPAR file. However, if a
DRG did not exist in Version 23.0 or a DRG included in Version 23.0 is
revised, we use the current version of the Medicare GROUPER and the
most recent complete year of MedPAR data to determine if the DRG is
subject to the postacute care transfer policy. Specifically, if the MS-
DRG's total number of discharges to postacute care equals or exceeds
the 55th percentile for all MS-DRGs and the proportion of short-stay
discharges to postacute care to total discharges in the MS-DRG exceeds
the 55th percentile for all MS-DRGs, CMS will apply the postacute care
transfer policy to that MS-DRG and to any other MS-DRG that shares the
same base MS-DRG. The statute at subparagraph 1886(d)(5)(J) of the Act
directs CMS to identify MS-DRGs based on a high volume of discharges to
postacute care facilities and a disproportionate use of postacute care
services. As discussed in the FY 2006 IPPS final rule (70 FR 47416), we
determined that the 55th percentile is an appropriate level at which to
establish these thresholds. In that same final rule (70 FR 47419), we
stated that we will not revise the list of DRGs subject to the
postacute care transfer policy annually unless we are making a change
to a specific MS-DRG.
To account for MS-DRGs subject to the postacute care policy that
exhibit exceptionally higher shares of costs very early in the hospital
stay, Sec. 412.4(f) also includes a special payment methodology. For
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment,
plus the single per diem payment, for the first day of the stay, as
well as a per diem payment for subsequent days (up to the full MS-DRG
payment (Sec. 412.4(f)(6))). For an MS-DRG to qualify for the special
payment methodology, the geometric mean length of stay must be greater
than 4
[[Page 18264]]
days, and the average charges of 1-day discharge cases in the MS-DRG
must be at least 50 percent of the average charges for all cases within
the MS-DRG. MS-DRGs that are part of an MS-DRG severity level group
will qualify under the MS-DRG special payment methodology policy if any
one of the MS-DRGs that share that same base MS-DRG qualifies (Sec.
412.4(f)(6)).
Prior to the enactment of the Bipartisan Budget Act of 2018 (Pub.
L. 115-123), under section 1886(d)(5)(J) of the Act, a discharge was
deemed a ``qualified discharge'' if the individual was discharged to
one of the following postacute care settings:
A hospital or hospital unit that is not a subsection (d)
hospital.
A skilled nursing facility.
Related home health services provided by a home health
agency provided within a timeframe established by the Secretary
(beginning within 3 days after the date of discharge).
Section 53109 of the Bipartisan Budget Act of 2018 amended section
1886(d)(5)(J)(ii) of the Act to also include discharges to hospice care
provided by a hospice program as a qualified discharge, effective for
discharges occurring on or after October 1, 2018. In the FY 2019 IPPS/
LTCH PPS final rule (83 FR 41394), we made conforming amendments to
Sec. 412.4(c) of the regulation to include discharges to hospice care
occurring on or after October 1, 2018, as qualified discharges. We
specified that hospital bills with a Patient Discharge Status code of
50 (Discharged/Transferred to Hospice--Routine or Continuous Home Care)
or 51 (Discharged/Transferred to Hospice, General Inpatient Care or
Inpatient Respite) are subject to the postacute care transfer policy in
accordance with this statutory amendment.
2. Proposed Changes for FY 2026
As discussed in the preamble of this proposed rule, based on our
analysis of FY 2024 MedPAR claims data, CMS proposed to make changes to
a number of MS-DRGs, effective for FY 2026. Specifically, we are
proposing the following changes:
Adding ICD-10-PCS codes describing restriction and
replacement of the thoracic aorta, and bypass and occlusion of the
subclavian and carotid arteries, to proposed new MS-DRG 209 (Complex
Aortic Arch Procedures).
Adding ICD-10-PCS codes describing restriction of the
abdominal aorta and restriction of the iliac artery to proposed new MS-
DRG 213 (Endovascular Abdominal Aorta with Iliac Branch Procedures).
Reassigning ICD-10-PCS codes describing extirpation of
matter from coronary arteries to proposed new MS-DRG 318 (Percutaneous
Coronary Atherectomy without Intraluminal Device).
Reassigning ICD-10-PCS codes describing extirpation of
matter from coronary arteries and adding ICD-10-PCS codes describing
dilation of coronary arteries and insertion of an intraluminal or other
device to proposed new MS-DRGs 359 and 360 (Percutaneous Coronary
Atherectomy with Intraluminal Device with MCC and without MCC,
respectively).
Adding ICD-10-CM diagnosis codes describing periprosthetic
joint infection and ICD-10-PCS procedure codes describing hip or knee
procedures to proposed new MS-DRGs 403 and 404 (Hip or Knee Procedures
with Principal Diagnosis of Periprosthetic Joint Infection with MCC and
without MCC, respectively).
Deleting MS-DRGs 294 and 295 (Deep Vein Thrombophlebitis
with CC/MCC and without CC/MCC, respectively) and reassigning the ICD-
10-CM codes to MS-DRGs 299, 300, and 301 (Peripheral Vascular Disorders
with MCC, with CC, and without CC/MCC, respectively).
Deleting MS-DRG 509 (Arthroscopy) and reassigning the ICD-
10-PCS codes describing inspection of various anatomic sites to their
respective clinically appropriate MS-DRGs.
Adding ICD-10-CM diagnosis codes describing the insertion
of a radioactive element into the brain to MS-DRG 023 (Craniotomy with
Major Device Implant or Acute Complex CNS Principal Diagnosis with MCC
or Chemotherapy Implant or Epilepsy with Neurostimulator).
When proposing changes to MS-DRGs that involve adding, deleting,
and reassigning procedure or diagnosis codes between proposed new and
revised MS-DRGs, we continue to believe it is necessary to evaluate the
affected MS-DRGs to determine whether they should be subject to the
postacute care transfer policy. Considering the proposed changes to the
MS-DRGs for FY 2026, according to the regulations under Sec. 412.4(d),
we evaluated the proposed new MS-DRGs using the general postacute care
transfer policy criteria and data from the FY 2024 MedPAR file. We
continue to believe it is appropriate to assess new MS-DRGs and
reassess revised MS DRGs when proposing reassignment of procedure codes
or diagnosis codes that would result in material changes to an MS DRG.
We evaluated any current MS-DRGs if we estimate that more than 5
percent of the current cases would shift from the current assigned MS-
DRGs to proposed new MS-DRGs, or to a current MS-DRG from a proposed
revised or deleted MS-DRG.
For existing MS-DRGs 321 and 322 (Percutaneous Cardiovascular
Procedures with Intraluminal Device with MCC or 4+ arteries/
intraluminal devices, and without MCC, respectively), we determined
that more than 5 percent of the current cases would shift from the
current assigned MS-DRGs to proposed new MS-DRGs 359 and 360. We also
determined that for MS-DRGs 463, 464, and 465 (Wound Debridement and
Skin Graft Except Hand for Musculoskeletal and Connective Tissue
Disorders with MCC, with CC, and without MCC/CC, respectively), more
than 5 percent of the current cases would shift from the current
assigned MS-DRGs to proposed new MS-DRGs 403 and 404. We note that for
all other proposed changes, the relative volume of cases shifting to or
from current MS-DRGs does not exceed the 5 percent threshold.
If an MS-DRG qualified for the postacute care transfer policy, we
also evaluated that MS-DRG under the special payment methodology
criteria according to regulations at Sec. 412.4(f)(6).
We note that proposed new MS-DRGs 403 and 404 would qualify to be
included on the list of MS-DRGs that are subject to the postacute care
transfer policy. We therefore are proposing to add proposed new MS-DRGs
403 and 404 to the list of MS-DRGs that are subject to the postacute
care transfer policy.
We note that MS-DRGs 463, 464 and 465 are currently subject to the
postacute care transfer policy. As a result of our review, these MS-
DRGs, as proposed to be revised, would continue to qualify to be
included on the list of MS-DRGs that are subject to the postacute care
transfer policy.
Using the December 2024 update of the FY 2024 MedPAR file, we have
developed the following chart which sets forth the most recent analysis
of the postacute care transfer policy criteria completed for this
proposed rule with respect to each of these proposed new or revised MS-
DRGs. For the FY 2026 final rule, we intend to update this analysis
using the most recent available data at that time.
[[Page 18265]]
List of Proposed New or Revised MS-DRGs Subject to Review of Postacute Care Transfer Policy Status for FY 2026
----------------------------------------------------------------------------------------------------------------
Percent of
Postacute shortstay Proposed
care Short-stay postacute care FY 2025 postacute
Proposed new Total transfer postacute transfers to postacute care
or revised MS-DRG title cases cases (55th care all cases transfer transfer
MS-DRG percentile: transfer (55th policy policy
1,028) cases percentile: status status
9.654%)
----------------------------------------------------------------------------------------------------------------
209........... Complex Aortic 334 * 181 34 10.2% New......... No.
Arch
Procedures.
213........... Endovascular 1,163 * 185 0 * 0 New......... No.
Abdominal
Aorta with
Iliac Branch
Procedures.
318........... Percutaneous 915 * 164 7 * 0.8 New......... No.
Coronary
Atherectomy
without
Intraluminal
Device.
359........... Percutaneous 3,027 * 876 65 * 2.2 New......... No.
Coronary
Atherectomy
with
Intraluminal
Device with
MCC.
360........... Percutaneous 3,934 * 398 36 * 0.9 New......... No.
Coronary
Atherectomy
with
Intraluminal
Device without
MCC.
321........... Percutaneous 30,850 8710 798 * 2.6 No.......... No.
Cardiovascular
Procedures
with
Intraluminal
Device with
MCC or 4+
arteries/
intraluminal
devices.
322........... Percutaneous 46,159 4254 0 * 0 No.......... No.
Cardiovascular
Procedures
with
Intraluminal
Device without
MCC.
403........... Hip or Knee 1,250 1071 494 39.5 New......... Yes.
Procedures
with Principal
Diagnosis of
Periprosthetic
Joint
Infection with
MCC.
404........... Hip or Knee 2,400 1995 682 28.4 New......... Yes.
Procedures
with Principal
Diagnosis of
Periprosthetic
Joint
Infection
without MCC.
463........... Wound 3,477 2865 1244 35.8 Yes......... Yes.
Debridement
and Skin Graft
Except Hand
for
Musculoskeleta
l and
Connective
Tissue
Disorders with
MCC.
464........... Wound 4,959 3714 1124 22.7 Yes......... Yes.
Debridement
and Skin Graft
Except Hand
for
Musculoskeleta
l and
Connective
Tissue
Disorders with
CC.
465........... Wound 1,357 * 688 0 * 0 Yes......... Yes.**
Debridement
and Skin Graft
Except Hand
for
Musculoskeleta
l and
Connective
Tissue
Disorders
without CC/MCC.
----------------------------------------------------------------------------------------------------------------
* Indicates a current postacute care transfer policy criterion that the MS-DRG did not meet.
** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS-DRG will all
qualify under the postacute care transfer policy if any one of the MS-DRGs that share that same base MS-DRG
qualifies.
During our annual review of proposed new or revised MS-DRGs and
analysis of the December 2024 update of the FY 2024 MedPAR file, we
reviewed the list of proposed revised or new MS-DRGs that qualify to be
included on the list of MS-DRGs subject to the postacute care transfer
policy for FY 2026 to determine if any of these MS-DRGs would also be
subject to the special payment methodology policy for FY 2026.
Based on our analysis of the proposed changes to the MS-DRGs
included in the proposed rule, we determined that proposed new and
revised MS-DRGs 404 and 464 meet the criteria for the MS-DRG special
payment methodology. As described in the regulations at Sec.
412.4(f)(6)(iv), MS-DRGs that share the same base MS-DRG will all
qualify under the MS-DRG special payment policy if any one of the MS-
DRGs that share that same base MS-DRG qualifies. Therefore, we are
proposing that MS-DRGs 403, 404, 463, 464, and 465 would be subject to
the MS-DRG special payment methodology, effective for FY 2026. For the
FY 2026 final rule, we intend to update this analysis using the most
recent available data at that time.
List of Proposed New or Revised MS-DRGs Subject to Review of Special Payment Policy Status for FY 2026
----------------------------------------------------------------------------------------------------------------
50 Percent
Geometric Average of average FY 2025 Proposed
Proposed new or mean charges of charges for special special
revised MS-DRG MS-DRG title length of 1-day all cases payment policy payment policy
stay discharges within MS- status status
DRG
----------------------------------------------------------------------------------------------------------------
403.............. Hip or Knee 10.57 $0 $130,572 New............ Yes.*
Procedures with
Principal
Diagnosis of
Periprosthetic
Joint Infection
with MCC.
404.............. Hip or Knee 5.58 87,126 72,946 New............ Yes.
Procedures with
Principal
Diagnosis of
Periprosthetic
Joint Infection
without MCC.
463.............. Wound Debridement 10.58 58,384 114,609 No............. Yes.*
and Skin Graft
Except Hand for
Musculoskeletal
and Connective
Tissue Disorders
with MCC.
464.............. Wound Debridement 5.40 71,548 68,604 No............. Yes.
and Skin Graft
Except Hand for
Musculoskeletal
and Connective
Tissue Disorders
with CC.
465.............. Wound Debridement 1.97 69,981 44,134 No............. Yes.*
and Skin Graft
Except Hand for
Musculoskeletal
and Connective
Tissue Disorders
without MCC/CC.
----------------------------------------------------------------------------------------------------------------
* As described in the policy at 42 CFR 412.4(f)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify
under the special payment transfer policy if any one of the MS-DRGs that share that same base MS-DRG
qualifies.
[[Page 18266]]
B. Proposed Changes in the Inpatient Hospital Update for FY 2026 (Sec.
412.64(d))
1. Proposed FY 2026 Inpatient Hospital Update
In accordance with section 1886(b)(3)(B)(i) of the Act, each year
we update the national standardized amount for inpatient hospital
operating costs by a factor called the ``applicable percentage
increase.'' For FY 2026, we are setting the applicable percentage
increase by applying the adjustments listed in this section in the same
sequence as we did for FY 2025. (We note that section
1886(b)(3)(B)(xii) of the Act required an additional reduction each
year only for FYs 2010 through 2019.) Specifically, consistent with
section 1886(b)(3)(B) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act, we are setting the applicable
percentage increase by applying the following adjustments in the
following sequence. The applicable percentage increase under the IPPS
for FY 2026 is equal to the rate-of-increase in the hospital market
basket for IPPS hospitals in all areas, subject to all of the
following:
A reduction of one-quarter of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals that fail to submit quality information
under rules established by the Secretary in accordance with section
1886(b)(3)(B)(viii) of the Act.
A reduction of three-quarters of the applicable percentage
increase (prior to the application of other statutory adjustments; also
referred to as the market basket update or rate-of-increase (with no
adjustments)) for hospitals not considered to be meaningful EHR users
in accordance with section 1886(b)(3)(B)(ix) of the Act.
An adjustment based on changes in economy-wide multifactor
productivity (MFP) (the productivity adjustment) in accordance with
section 1886(b)(3)(B)(xi)(II) of the Act. Section 1886(b)(3)(B)(xi) of
the Act, as added by section 3401(a) of the Affordable Care Act, states
that application of the productivity adjustment may result in the
applicable percentage increase being less than zero.
As published in the FY 2006 IPPS final rule (70 FR 47403), in
accordance with section 404 of Public Law 108-173, CMS determined a new
frequency for rebasing the hospital market basket of every 4 years. In
compliance with section 404 of Public Law 108-173, in the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45194 through 45204), we replaced the 2014-
based IPPS operating and capital market baskets with the rebased and
revised 2018-based IPPS operating and capital market baskets beginning
in FY 2022. Consistent with our established frequency of rebasing the
IPPS market basket every 4 years, in this FY 2026 IPPS/LTCH PPS
proposed rule, we are proposing to rebase and revise the IPPS market
basket to a 2023 base year, effective beginning in FY 2026.
We are proposing to base the FY 2026 market basket update used to
determine the applicable percentage increase for the IPPS on IHS Global
Inc.'s (IGI's) fourth quarter 2024 forecast of the proposed 2023-based
IPPS market basket rate-of-increase with historical data through third
quarter 2024, which is estimated to be 3.2 percent. We are also
proposing that if more recent data subsequently become available (for
example, a more recent estimate of the market basket update), we would
use such data, if appropriate, to determine the FY 2026 market basket
update in the final rule.
In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through
51692), we finalized our methodology for calculating and applying the
productivity adjustment. As we explained in that rule, section
1886(b)(3)(B)(xi)(II) of the Act, as added by section 3401(a) of the
Affordable Care Act, defines this productivity adjustment as equal to
the 10-year moving average of changes in annual economy-wide, private
nonfarm business MFP (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, calendar year, cost
reporting period, or other annual period). The U.S. Department of
Labor's Bureau of Labor Statistics (BLS) publishes the official
measures of private nonfarm business productivity for the U.S. economy.
We note that previously the productivity measure referenced in section
1886(b)(3)(B)(xi)(II) of the Act was published by BLS as private
nonfarm business multifactor productivity. Beginning with the November
18, 2021, release of productivity data, BLS replaced the term
multifactor productivity (MFP) with total factor productivity (TFP).
BLS noted that this is a change in terminology only and will not affect
the data or methodology. As a result of the BLS name change, the
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the
Act is now published by BLS as private nonfarm business total factor
productivity. However, as mentioned, the data and methods are
unchanged. Please see www.bls.gov for the BLS historical published TFP
data. A complete description of IGI's TFP projection methodology is
available on the CMS website at https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information. In addition, we note that beginning
with the FY 2022 IPPS/LTCH PPS final rule, we refer to this adjustment
as the productivity adjustment rather than the MFP adjustment, to more
closely track the statutory language in section 1886(b)(3)(B)(xi)(II)
of the Act. We note that the adjustment continues to rely on the same
underlying data and methodology.
For FY 2026, we are proposing a productivity adjustment of 0.8
percent. Similar to the proposed market basket rate-of-increase, for
this proposed rule, the estimate of the proposed FY 2026 productivity
adjustment is based on IGI's fourth quarter 2024 forecast. As noted
previously, we are proposing that if more recent data subsequently
become available, we would use such data, if appropriate, to determine
the FY 2026 productivity adjustment for the final rule.
Based on these data, we have determined four proposed applicable
percentage increases to the standardized amount for FY 2026, as
specified in the following table:
Table VI.B-01--Proposed FY 2026 Applicable Percentage Increases for the IPPS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital submitted Hospital did NOT Hospital did NOT
quality data and is Hospital submitted submit quality data submit quality data
FY 2026 a meaningful EHR quality data and is NOT and is a meaningful and is NOT a
user a meaningful EHR user EHR user meaningful EHR user
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed Market Basket Rate[dash]of[dash]Increase......... 3.2 3.2 3.2 3.2
Proposed Adjustment for Failure to Submit Quality Data 0.0 0.0 -0.8 -0.8
under Section 1886(b)(3)(B)(viii) of the Act.............
[[Page 18267]]
Proposed Adjustment for Failure to be a Meaningful EHR 0.0 -2.4 0.0 -2.4
User under Section 1886(b)(3)(B)(ix) of the Act..........
Proposed Productivity Adjustment under Section -0.8 -0.8 -0.8 -0.8
1886(b)(3)(B)(xi) of the Act.............................
Proposed Applicable Percentage Increase Applied to 2.4 0.0 1.6 -0.8
Standardized Amount......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42344), we revised
our regulations at 42 CFR 412.64(d) to reflect the current law for the
update for FY 2020 and subsequent fiscal years. Specifically, in
accordance with section 1886(b)(3)(B) of the Act, we added paragraph
(d)(1)(viii) to Sec. 412.64 to set forth the applicable percentage
increase to the operating standardized amount for FY 2020 and
subsequent fiscal years as the percentage increase in the market basket
index, subject to the reductions specified under Sec. 412.64(d)(2) for
a hospital that does not submit quality data and Sec. 412.64(d)(3) for
a hospital that is not a meaningful EHR user, less a productivity
adjustment.
Section 1886(b)(3)(B)(iv) of the Act provides that the applicable
percentage increase to the hospital-specific rates for SCHs and MDHs
equals the applicable percentage increase set forth in section
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for all
other hospitals subject to the IPPS). Therefore, the update to the
hospital-specific rates for SCHs and MDHs is also subject to section
1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) and
10319(a) of the Affordable Care Act.
As discussed in section V.F. of the preamble of this proposed rule,
section 2202 of the Full-Year Continuing Appropriations and Extensions
Act, 2025 extended the MDH program through FY 2025. Therefore, under
current law, the MDH program will expire for discharges on or after
October 1, 2025. We refer readers to section V.F. of the preamble of
this proposed rule for further discussion of the MDH program. We note
that if the MDH program were to be extended by law into FY 2026, the
proposed updates to the hospital-specific rates for SCHs as described
in this section would also apply to the hospital-specific rates for
MDHs for FY 2026.
For FY 2026, we are proposing the following updates to the
hospital-specific rates applicable to SCHs: A proposed update of 2.4
percent for a hospital that submits quality data and is a meaningful
EHR user (as defined in section 1886(n) of the Act); a proposed update
of 0.0 percent for a hospital that submits quality data and is not a
meaningful EHR user; a proposed update of 1.6 percent for a hospital
that fails to submit quality data and is a meaningful EHR user; and a
proposed update of -0.8 percent for a hospital that fails to submit
quality data and is not an meaningful EHR user. As previously
discussed, we are proposing that if more recent data subsequently
become available (for example, a more recent estimate of the market
basket update and the productivity adjustment), we would use such data,
if appropriate, to determine the market basket update and the
productivity adjustment in the final rule.
2. Proposed FY 2026 Puerto Rico Hospital Update
Section 602 of Public Law 114-113 amended section 1886(n)(6)(B) of
the Act to specify that subsection (d) Puerto Rico hospitals are
eligible for incentive payments for the meaningful use of certified EHR
technology, effective beginning FY 2016. In addition, section
1886(n)(6)(B) of the Act was amended to specify that the adjustments to
the applicable percentage increase under section 1886(b)(3)(B)(ix) of
the Act apply to subsection (d) Puerto Rico hospitals that are not
meaningful EHR users, effective beginning FY 2022. Accordingly, for FY
2022, section 1886(b)(3)(B)(ix) of the Act in conjunction with section
602(d) of Public Law 114-113 requires that any subsection (d) Puerto
Rico hospital that is not a meaningful EHR user as defined in section
1886(n)(3) of the Act and not subject to an exception under section
1886(b)(3)(B)(ix) of the Act will have ``three-quarters'' of the
applicable percentage increase (prior to the application of other
statutory adjustments), or three-quarters of the applicable market
basket rate-of-increase, reduced by 33\1/3\ percent. The reduction to
three-quarters of the applicable percentage increase for subsection (d)
Puerto Rico hospitals that are not meaningful EHR users increases to
66\2/3\ percent for FY 2023, and, for FY 2024 and subsequent fiscal
years, to 100 percent. (We note that section 1886(b)(3)(B)(viii) of the
Act, which specifies the adjustment to the applicable percentage
increase for ``subsection (d)'' hospitals that do not submit quality
data under the rules established by the Secretary, is not applicable to
hospitals located in Puerto Rico.) The regulations at 42 CFR
412.64(d)(3)(ii) reflect the current law for the update for subsection
(d) Puerto Rico hospitals for FY 2022 and subsequent fiscal years. In
the FY 2019 IPPS/LTCH PPS final rule, we finalized the payment
reductions (83 FR 41674).
For FY 2026, consistent with section 1886(b)(3)(B) of the Act, as
amended by section 602 of Public Law 114-113, we are setting the
applicable percentage increase for Puerto Rico hospitals by applying
the following adjustments in the following sequence. Specifically, the
applicable percentage increase under the IPPS for Puerto Rico hospitals
will be equal to the rate of-increase in the hospital market basket for
IPPS hospitals in all areas, subject to a reduction of three-quarters
of the applicable percentage increase (prior to the application of
other statutory adjustments; also referred to as the market basket
update or rate-of-increase (with no adjustments)) for Puerto Rico
hospitals not considered to be meaningful EHR users in accordance with
section 1886(b)(3)(B)(ix) of the Act, and then subject to the
productivity adjustment at section 1886(b)(3)(B)(xi) of the Act. As
noted previously, section 1886(b)(3)(B)(xi) of the Act states that
application of the productivity adjustment may result in the applicable
percentage increase being less than zero.
Based on IGI's fourth quarter 2024 forecast of the proposed 2023-
based IPPS market basket update with historical data through third
quarter 2024, for this FY 2026 IPPS/LTCH PPS proposed rule, in
accordance with section 1886(b)(3)(B) of the Act, as discussed
previously, for Puerto Rico hospitals we are proposing a market basket
update of 3.2 percent less a productivity adjustment of 0.8 percentage
point. Therefore, for FY 2026, depending on whether a Puerto
[[Page 18268]]
Rico hospital is a meaningful EHR user, there are two possible
applicable percentage increases that could be applied to the
standardized amount. Based on these data, we determined the following
proposed applicable percentage increases to the standardized amount for
FY 2026 for Puerto Rico hospitals:
For a Puerto Rico hospital that is a meaningful EHR user,
we are proposing a FY 2026 applicable percentage increase to the
operating standardized amount of 2.4 percent (that is, the FY 2026
estimate of the proposed market basket rate-of-increase of 3.2 percent
less 0.8 percentage point for the proposed productivity adjustment).
For a Puerto Rico hospital that is not a meaningful EHR
user, we are proposing a FY 2026 applicable percentage increase to the
operating standardized amount of 0.0 percent (that is, the FY 2026
estimate of the proposed market basket rate-of-increase of 3.2 percent,
less an adjustment of 2.4 percentage points (the proposed market basket
rate-of-increase of 3.2 percent x 0.75 for failure to be a meaningful
EHR user), and less 0.8 percentage point for the proposed productivity
adjustment).
As noted previously, we are proposing that if more recent data
subsequently become available, we would use such data, if appropriate,
to determine the FY 2026 market basket update and the productivity
adjustment for the FY 2026 IPPS/LTCH PPS final rule.
Table VI.B-02--Proposed FY 2026 Applicable Percentage Increases for
Puerto Rico Hospitals Under the IPPS
------------------------------------------------------------------------
Hospital is a
FY 2026 meaningful EHR Hospital is NOT a
user meaningful EHR user
------------------------------------------------------------------------
Proposed Market Basket Rate-of- 3.2 3.2
Increase.......................
Proposed Adjustment for Failure 0.0 -2.4
to be a Meaningful EHR User
under Section 1886(b)(3)(B)(ix)
of the Act.....................
Proposed Productivity Adjustment -0.8 -0.8
under Section 1886(b)(3)(B)(xi)
of the Act.....................
Proposed Applicable Percentage 2.4 0.0
Increase Applied to
Standardized Amount............
------------------------------------------------------------------------
C. Rural Referral Centers (RRCs) Annual Updates to Case-Mix Index (CMI)
and Discharge Criteria (Sec. 412.96)
Under the authority of section 1886(d)(5)(C)(i) of the Act, the
regulations at 42 CFR 412.96 set forth the criteria that a hospital
must meet in order to qualify under the IPPS as a rural referral center
(RRC). RRCs receive special treatment under both the DSH payment
adjustment and the criteria for geographic reclassification.
Section 402 of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Pub. L. 108-173) raised the DSH payment
adjustment for RRCs such that they are not subject to the 12-percent
cap on DSH payments that is applicable to other rural hospitals. RRCs
also are not subject to the proximity criteria when applying for
geographic reclassification. In addition, they do not have to meet the
requirement that a hospital's average hourly wage must exceed, by a
certain percentage, the average hourly wage of the labor market area in
which the hospital is located.
Section 4202(b) of the Balanced Budget Act of 1997 (Pub. L. 105-33)
states, in part, that any hospital classified as an RRC by the
Secretary for FY 1991 shall be classified as such an RRC for FY 1998
and each subsequent fiscal year. In the August 29, 1997, IPPS final
rule with comment period (62 FR 45999 through 46000), we reinstated RRC
status for all hospitals that lost that status due to triennial review
or MGCRB reclassification. However, we did not reinstate the status of
hospitals that lost RRC status because they were now urban for all
purposes because of the OMB designation of their geographic area as
urban. Subsequently, in the August 1, 2000, IPPS final rule (65 FR
47087), we indicated that we were revisiting that decision.
Specifically, we stated that we would permit hospitals that previously
qualified as an RRC and lost their status due to OMB redesignation of
the county in which they are located from rural to urban, to be
reinstated as an RRC. Otherwise, a hospital seeking RRC status must
satisfy all of the other applicable criteria. We use the definitions of
``urban'' and ``rural'' specified in subpart D of 42 CFR part 412. One
of the criteria under which a hospital may qualify as an RRC is to have
275 or more beds available for use (42 CFR 412.96(b)(1)(ii)). A rural
hospital that does not meet the bed size requirement can qualify as an
RRC if the hospital meets two mandatory prerequisites (a minimum case-
mix index (CMI) and a minimum number of discharges), and at least one
of three optional criteria (relating to specialty composition of
medical staff, source of inpatients, or referral volume). (We refer
readers to 42 CFR 412.96(c)(1) through (5) and the September 30, 1988,
Federal Register (53 FR 38513) for additional discussion.) With respect
to the two mandatory prerequisites, a hospital may be classified as an
RRC if the hospital's--
CMI is at least equal to the lower of the median CMI for
urban hospitals in its census region, excluding hospitals with approved
teaching programs, or the median CMI for all urban hospitals
nationally; and
Number of discharges is at least 5,000 per year, or, if
fewer, the median number of discharges for urban hospitals in the
census region in which the hospital is located. The number of
discharges criterion for an osteopathic hospital is at least 3,000
discharges per year, as specified in section 1886(d)(5)(C)(i) of the
Act.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45217), in light of
the COVID-19 PHE, we amended the regulations at 42 CFR 412.96(h)(1) to
provide for the use of the best available data rather than the latest
available data in calculating the national and regional CMI criteria.
We also amended the regulations at 42 CFR 412.96(c)(1) to indicate that
the individual hospital's CMI value for discharges during the same
Federal fiscal year used to compute the national and regional CMI
values is used for purposes of determining whether a hospital qualifies
for RRC classification. We also amended the regulations 42 CFR
412.96(i)(1) and (2), which describe the methodology for calculating
the number of discharges criteria, to provide for the use of the best
available data rather than the latest available or most recent data
when calculating the regional discharges for RRC classification.
1. Case-Mix Index (CMI)
Section 412.96(c)(1) provides that CMS establish updated national
and regional CMI values in each year's annual notice of prospective
payment
[[Page 18269]]
rates for purposes of determining RRC status. The methodology we used
to determine the national and regional CMI values is set forth in the
regulations at 42 CFR 412.96(c)(1)(ii). The proposed national median
CMI value for FY 2026 is based on the CMI values of all urban hospitals
nationwide, and the proposed regional median CMI values for FY 2026 are
based on the CMI values of all urban hospitals within each census
region, excluding those hospitals with approved teaching programs (that
is, those hospitals that train residents in an approved GME program as
provided in 42 CFR 413.75). These proposed values are based on
discharges occurring during FY 2024 (October 1, 2023, through September
30, 2024), and include bills posted to CMS' records through December
2024. We believe that this is the best available data for use in
calculating the proposed national and regional median CMI values and is
consistent with our proposal to use of the FY 2024 MedPAR claims data
for FY 2026 ratesetting.
In this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing that,
in addition to meeting other criteria, if rural hospitals with fewer
than 275 beds are to qualify for initial RRC status for cost reporting
periods beginning on or after October 1, 2025, they must have a CMI
value for FY 2024 that is at least--
1.7802 (national--all urban); or
The median CMI value (not transfer-adjusted) for urban
hospitals (excluding hospitals with approved teaching programs as
identified in 42 CFR 413.75) calculated by CMS for the census region in
which the hospital is located.
The proposed median CMI values by region are set forth in the
following table. We intend to update the proposed CMI values in the FY
2026 IPPS/LTCH PPS final rule to reflect the updated FY 2024 MedPAR
file, which will contain data from additional bills received through
March 2025.
------------------------------------------------------------------------
Proposed case-mix
Region index value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT)............ 1.499
2. Middle Atlantic (PA, NJ, NY).................... 1.56165
3. East North Central (IL, IN, MI, OH, WI)......... 1.6175
4. West North Central (IA, KS, MN, MO, NE, ND, SD). 1.73965
5. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, 1.635
WV)...............................................
6. East South Central (AL, KY, MS, TN)............. 1.5901
7. West South Central (AR, LA, OK, TX)............. 1.78085
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)....... 1.8092
9. Pacific (AK, CA, HI, OR, WA).................... 1.7793
------------------------------------------------------------------------
A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are
available on the Provider Statistical and Reimbursement (PS&R) System.
In keeping with our policy on discharges, the CMI values are computed
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
Section 412.96(c)(2)(i) provides that CMS set forth the national
and regional numbers of discharges criteria in each year's annual
notice of prospective payment rates for purposes of determining RRC
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the
national standard is set at 5,000 discharges. For FY 2026, we are
proposing to update the regional standards based on discharges for
urban hospitals' cost reporting periods that began during FY 2023 (that
is, October 1, 2022, through September 30, 2023), which are the latest
cost report data available at the time this proposed rule was
developed. We believe that this is the best available data for use in
calculating the proposed median number of discharges by region and is
consistent with our data proposal to use cost report data from cost
reporting periods beginning during FY 2023 for FY 2026 rate setting.
Therefore, we are proposing that, in addition to meeting other
criteria, a hospital, if it is to qualify for initial RRC status for
cost reporting periods beginning on or after October 1, 2025, must
have, as the number of discharges for its cost reporting period that
began during FY 2023, at least--
5,000 (3,000 for an osteopathic hospital); or
If less, the median number of discharges for urban
hospitals in the census region in which the hospital is located. We
refer readers to the proposed number of discharges as set forth in the
following table. We intend to update these numbers in the FY 2026 final
rule based on the latest available cost report data.
------------------------------------------------------------------------
Proposed number
Region of discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).............. 8,903
2. Middle Atlantic (PA, NJ, NY)...................... 9,844
3. East North Central (IL, IN, MI, OH, WI)........... 7,762
4. West North Central (IA, KS, MN, MO, NE, ND, SD)... 7,614
5. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, 10,919
WV).................................................
6. East South Central (AL, KY, MS, TN)............... 8,315
7. West South Central (AR, LA, OK, TX)............... 5,911
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)......... 8,048
9. Pacific (AK, CA, HI, OR, WA)...................... 8,932
------------------------------------------------------------------------
We note that because the median number of discharges for hospitals
in each census region is greater than the national standard of 5,000
discharges, under this proposed rule, 5,000 discharges is the minimum
criterion for all hospitals, except for osteopathic hospitals for which
the minimum criterion is 3,000 discharges.
[[Page 18270]]
D. Proposed Payment Adjustment for Low-Volume Hospitals (Sec. 412.101)
1. Background
Section 1886(d)(12) of the Act provides for an additional payment
to each qualifying low-volume hospital under the IPPS beginning in FY
2005. The low-volume hospital payment adjustment is implemented in the
regulations at 42 CFR 412.101. The additional payment adjustment to a
low-volume hospital provided for under section 1886(d)(12) of the Act
is in addition to any payment calculated under section 1886 of the Act
and is based on the per discharge amount paid to the qualifying
hospital. In other words, the low-volume hospital payment adjustment is
based on total per discharge payments made under section 1886 of the
Act, including capital, DSH, IME, and outlier payments. For SCHs and
MDHs, the low-volume hospital payment adjustment is based in part on
either the Federal rate or the hospital-specific rate, whichever
results in a greater operating IPPS payment. The payment adjustment for
low-volume hospitals is not budget neutral.
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69348
through 69352), Section 306 of the Consolidated Appropriations Act,
2024 (CAA, 2024) (Pub. L. 118-42), extended the temporary changes to
the low-volume hospital qualifying criteria and payment adjustment
under the IPPS, that is the modified definition of low-volume hospital
and the methodology for calculating the payment adjustment for low-
volume hospitals under section 1886(d)(12), through December 31, 2024.
Section 3201 of the American Relief Act, 2025 (Pub. L. 118-158),
further extended those temporary changes through March 31, 2025. Most
recently, section 2201 of the Full-Year Continuing Appropriations and
Extensions Act, 2025 (Pub. L. 119-4), enacted on March 15, 2025,
provides an extension of those temporary changes to the qualifying
criteria and payment adjustment methodology for certain low-volume
hospitals through September 30, 2025. Absent further Congressional
action, beginning October 1, 2025, the low-volume hospital qualifying
criteria and payment adjustment are set to revert to the statutory
requirements that were in effect prior to FY 2011, and the preexisting
low-volume hospital payment adjustment methodology and qualifying
criteria, as implemented in FY 2005 and discussed later in this
section, will resume. We discuss the payment policies for FY 2026, in
section V.D.3. of the preamble of this proposed rule.
Table V.D.-01--Low-Volume Hospital Qualifying Criteria and Payment Adjustment for FYs 2019 and Subsequent FYs
----------------------------------------------------------------------------------------------------------------
Road Total
Fiscal years miles discharges Payment adjustment
----------------------------------------------------------------------------------------------------------------
2019 through 2025......................... >15 <=500 0.25.
>500 <3,800 0.25-[0.25/3300] x (number of total
discharges-500) = (95/330)-(number of
total discharges/13,200).
2026 and subsequent years................. >25 <200 0.25.
----------------------------------------------------------------------------------------------------------------
2. Extension of Temporary Changes to Low-Volume Hospital Payment
Definition and Payment Adjustment Methodology and Conforming Changes to
Regulations
As discussed previously, prior to the enactment of the American
Relief Act, 2025, the temporary changes to the low-volume hospital
qualifying criteria and payment adjustment provided by section 306 of
CAA, 2024 were set to expire on January 1, 2025. Section 3201 of the
American Relief Act, 2025 extended the temporary changes to the low-
volume hospital qualifying criteria and payment adjustment under the
IPPS for the portion of FY 2025 beginning on January 1, 2025, and
ending on March 31, 2025 (that is, for discharges occurring before
April 1, 2025). We note that we address the extension provided by
section 3201 of the American Relief Act, 2025, in Change Request 13949
(Transmittal 13035), issued January 6, 2025. For additional
information, please refer to the transmittal https://www.cms.gov/medicare/regulations-guidance/transmittals/2025-transmittals/r13035otn.
Subsequently, section 2201 of the Full-Year Continuing Appropriations
and Extensions Act, 2025 further extended the temporary changes to the
low-volume hospital qualifying criteria and payment adjustment under
the IPPS for the remainder of FY 2025 (that is, for discharges
occurring before October 1, 2025). We note the extension provided by
section 2201 of the Full-Year Continuing Appropriations and Extensions
Act, 2025 will be addressed in forthcoming guidance.
Under section 1886(d)(12)(C)(i) of the Act, as amended by the Full-
Year Continuing Appropriations and Extensions Act, 2025, for FYs 2019
through FY 2025, a subsection (d) hospital qualifies as a low-volume
hospital if it is more than 15 road miles from another subsection (d)
hospital and has less than 3,800 total discharges during the fiscal
year. In accordance with the existing regulations at Sec. 412.101(a),
we define the term ``road miles'' to mean ``miles'' as defined at Sec.
412.92(c)(1). Under section 1886(d)(12)(D) of the Act, as amended, for
discharges occurring in FYs 2019 through 2025, the Secretary determines
the applicable percentage increase using a continuous, linear sliding
scale ranging from an additional 25 percent payment adjustment for low-
volume hospitals with 500 or fewer discharges to a zero percent
additional payment for low volume hospitals with more than 3,800
discharges in the fiscal year. Consistent with the requirements of
section 1886(d)(12)(C)(ii) of the Act, the term ``discharge'' for
purposes of these provisions refers to total discharges, regardless of
payer (that is, Medicare and non-Medicare discharges).
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41399), we specified
a continuous, linear sliding scale formula to determine the low volume
payment adjustment, as reflected in the regulations at Sec.
412.101(c)(3)(ii). Consistent with the statute, we provided that
qualifying hospitals with 500 or fewer total discharges will receive a
low-volume hospital payment adjustment of 25. For qualifying hospitals
with fewer than 3,800 discharges but more than 500 discharges, the low-
volume payment adjustment is calculated by subtracting from 25 percent
the proportion of payments associated with the discharges in excess of
500. For qualifying hospitals with fewer than 3,800 total discharges
but more than 500 total discharges, the low-volume hospital payment
adjustment is calculated using the formula at Sec. 412.101(c)(3)(ii)
(which
[[Page 18271]]
is shown in the Table V.D.-01). For this purpose, the term
``discharge'' refers to total discharges, regardless of payer (that is,
Medicare and non-Medicare discharges). The hospital's most recently
submitted cost report is used to determine if the hospital meets the
discharge criterion to receive the low volume payment adjustment in the
current year (Sec. 412.101(b)(2)(iii)). The low-volume hospital
payment adjustment for FYs 2019 through 2024 and the portion of FY 2025
beginning on October 1, 2024, and ending on December 31, 2024, is set
forth in the current regulations at Sec. 412.101(c)(3).
In this proposed rule, we propose to make conforming changes to the
regulation text in Sec. 412.101 to reflect the extensions of the
changes to the qualifying criteria and the payment adjustment
methodology for low-volume hospitals in accordance with provisions of
the American Relief Act, 2025 and the Full-Year Continuing
Appropriations and Extensions Act, 2025. Specifically, we propose to
make conforming changes to paragraphs (b)(2)(iii) and (c)(3)
introductory text of Sec. 412.101 to reflect that the low-volume
hospital payment adjustment policy in effect through FY 2025 is the
same low-volume hospital payment adjustment policy in effect for FYs
2019 through December 31, 2024 (as described in the FY 2019 IPPS/LTCH
PPS final rule (83 FR 41398 through 41399) and in the FY 2025 IPPS/LTCH
final rule (89 FR 69348 through 69352)). In addition, in accordance
with the provisions of the Full-Year Continuing Appropriations and
Extensions Act, 2025, we propose to make conforming changes to
paragraphs (b)(2)(i) and (c)(1) of Sec. 412.101 to reflect that for FY
2026 and subsequent fiscal years, the low-volume hospital payment
adjustment policy will revert back to the low-volume hospital payment
adjustment policy in effect for FYs 2005 through 2010, as described in
section V.D.3. of the preamble of this proposed rule. We further
propose that if the temporary changes to the low-volume payment
adjustment are extended through legislation beyond September 30, 2025,
we would make the conforming changes to the regulations at Sec.
412.101(b)(2)(i) and (iii) and (c)(1) and (3) to reflect any further
extension.
3. Payment Adjustment for FY 2026 and Subsequent Fiscal Years
In accordance with section 1886(d)(12) of the Act, as amended by
section 2201 of the Full-Year Continuing Appropriations and Extensions
Act, 2025, beginning with discharges occurring on or after October 1,
2025, the low-volume hospital definition and payment adjustment
methodology will revert to the statutory requirements that were in
effect prior to the amendments made by the Affordable Care Act and
subsequent legislation. Specifically, section 1886(d)(12)(B) of the Act
requires, for discharges occurring in FYs 2005 through 2010 and for
discharges occurring in FY 2026 and subsequent years, that the
Secretary determine an applicable percentage increase for these low-
volume hospitals based on the ``empirical relationship'' between the
standardized cost-per-case for such hospitals and the total number of
discharges of such hospitals and the amount of the additional
incremental costs (if any) that are associated with such number of
discharges. The statute thus mandates that the Secretary develop an
empirically justifiable adjustment based on the relationship between
costs and discharges for these low-volume hospitals.
Therefore, absent further Congressional action, effective FY 2026
and subsequent years, under current policy at Sec. 412.101(b), to
qualify as a low-volume hospital, a subsection (d) hospital must be
more than 25 road miles from another subsection (d) hospital and have
less than 200 discharges (that is, less than 200 discharges total,
including both Medicare and non-Medicare discharges) during the fiscal
year. For FY 2026 and subsequent years, the statute specifies that a
low-volume hospital must have less than 800 discharges during the
fiscal year. However, as required by section 1886(d)(12)(B)(i) of the
Act, the Secretary has developed an empirically justifiable payment
adjustment based on the relationship, for IPPS hospitals with less than
800 discharges, between the additional incremental costs (if any) that
are associated with a particular number of discharges. Based on an
analysis we conducted for the FY 2005 IPPS final rule (69 FR 49099
through 49102), a 25-percent low-volume adjustment to all qualifying
hospitals with less than 200 discharges was found to be most consistent
with the statutory requirement to provide relief for low-volume
hospitals where there is empirical evidence that higher incremental
costs are associated with low numbers of total discharges. (Under the
policy we established in that same final rule, hospitals with between
200 and 799 discharges do not receive a low-volume hospital
adjustment.)
As discussed previously, for FYs 2005 through 2010 and FY 2019 and
subsequent years, the discharge determination is made based on the
hospital's number of total discharges, that is, Medicare and non-
Medicare discharges. The hospital's most recently submitted cost report
is used to determine if the hospital meets the discharge criterion to
receive the low-volume payment adjustment in the current year (Sec.
412.101(b)(2)(i)). We use cost report data to determine if a hospital
meets the discharge criterion because this is the best available data
source that includes information on both Medicare and non-Medicare
discharges. We note that, for FYs 2011 through 2018, we used the most
recently available MedPAR data to determine the hospital's Medicare
discharges because only Medicare discharges were used to determine if a
hospital met the discharge criterion for those years.
In addition to the discharge criterion, a hospital must also meet
the mileage criterion to qualify for the low-volume payment adjustment.
As specified by section 1886(d)(12)(C)(i) of the Act, a low-volume
hospital must be more than 25 road miles (or 15 road miles for FYs 2011
through 2025) from another subsection (d) hospital. Accordingly, for FY
2026 and subsequent fiscal years, in addition to the discharge
criterion, the eligibility for the low-volume payment adjustment is
also dependent upon the hospital meeting the mileage criterion at Sec.
412.101(b)(2)(i), which specifies that a hospital must be located more
than 25 road miles from the nearest subsection (d) hospital, consistent
with section 1886(d)(12)(C)(i) of the Act. We define, at Sec.
412.101(a), the term ``road miles'' to mean ``miles'' as defined at
Sec. 412.92(c)(1) (75 FR 50238 through 50275 and 50414). As previously
noted, we propose to make conforming changes to paragraphs (b)(2)(i)
and (c)(1) of Sec. 412.101 to reflect that for FY 2026 and subsequent
fiscal years, the low-volume hospital payment adjustment policy is the
same as that in effect for FYs 2005 through 2010.
4. Process for Requesting and Obtaining the Low-Volume Hospital Payment
Adjustment for FY 2026
In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50238 through 50275
and 50414) and subsequent rulemaking, most recently in the FY 2025
IPPS/LTCH PPS final rule (89 FR 69348 through 69352), we discussed the
process for requesting and obtaining the low-volume hospital payment
adjustment. Under this previously established process, a hospital makes
a written request for the low-volume payment adjustment under Sec.
412.101 to its MAC. This request must contain sufficient documentation
to establish that the hospital meets the applicable mileage and
discharge criteria. The MAC will determine if the hospital
[[Page 18272]]
qualifies as a low-volume hospital by reviewing the data the hospital
submits with its request for low-volume hospital status in addition to
other available data. Under this approach, a hospital will know in
advance whether or not it will receive a payment adjustment under the
low-volume hospital policy. The MAC and CMS may review available data
such as the number of discharges, in addition to the data the hospital
submits with its request for low-volume hospital status, to determine
whether or not the hospital meets the qualifying criteria. (For
additional information on our existing process for requesting the low-
volume hospital payment adjustment, we refer readers to the FY 2019
IPPS/LTCH PPS final rule (83 FR 41399 through 41401).)
As explained earlier, for FY 2019 and subsequent fiscal years, the
discharge determination is made based on the hospital's number of total
discharges, that is, Medicare and non-Medicare discharges, as was the
case for FYs 2005 through 2010. Under Sec. 412.101(b)(2)(i) and (iii),
a hospital's most recently submitted cost report is used to determine
if the hospital meets the discharge criterion to receive the low-volume
payment adjustment in the current year. As discussed in the FY 2019
IPPS/LTCH PPS final rule (83 FR 41399 and 41400), we use cost report
data to determine if a hospital meets the discharge criterion because
this is the best available data source that includes information on
both Medicare and non-Medicare discharges. (For FYs 2011 through 2018,
the most recently available MedPAR data were used to determine the
hospital's Medicare discharges because non-Medicare discharges were not
used to determine if a hospital met the discharge criterion for those
years.) Therefore, a hospital must refer to its most recently submitted
cost report for total discharges (Medicare and non-Medicare) to decide
whether or not to apply for low-volume hospital status for a particular
fiscal year.
In addition to the discharge criterion, eligibility for the low-
volume hospital payment adjustment is also dependent upon the hospital
meeting the applicable mileage criterion specified in section
1886(d)(12)(C)(i) of the Act, which is codified at Sec. 412.101(b)(2),
for the fiscal year. To meet the mileage criterion to qualify for the
low-volume hospital payment adjustment for FY 2026, a hospital must be
located more than 25 road miles from the nearest subsection (d)
hospital. (We define in Sec. 412.101(a) the term ``road miles'' to
mean ``miles'' as defined in Sec. 412.92(c)(1) (75 FR 50238 through
50275 and 50414).) For establishing that the hospital meets the mileage
criterion, the use of a web-based mapping tool as part of the
documentation is acceptable. The MAC will determine if the information
submitted by the hospital, such as the name and street address of the
nearest hospital(s), location on a map, and distance from the hospital
requesting low-volume hospital status, is sufficient to document that
it meets the mileage criterion. If not, the MAC will follow up with the
hospital to obtain additional necessary information to determine
whether or not the hospital meets the applicable mileage criterion.
In accordance with our previously established process, a hospital
must make a written request for low-volume hospital status that is
received by its MAC by September 1 immediately preceding the start of
the Federal fiscal year for which the hospital is applying for low-
volume hospital status in order for the applicable low-volume hospital
payment adjustment to be applied to payments for its discharges for the
fiscal year beginning on or after October 1 immediately following the
request (that is, the start of the Federal fiscal year). For a hospital
whose request for low-volume hospital status is received after
September 1, if the MAC determines the hospital meets the criteria to
qualify as a low-volume hospital, the MAC will apply the applicable
low-volume hospital payment adjustment to determine payment for the
hospital's discharges for the fiscal year, effective prospectively
within 30 days of the date of the MAC's low-volume status
determination.
Consistent with this previously established process, for FY 2026,
we are proposing that a hospital must submit a written request for low-
volume hospital status to its MAC that includes sufficient
documentation to establish that the hospital meets the applicable
mileage and discharge criteria (as described earlier). Specifically,
for FY 2026, a hospital must make a written request for low-volume
hospital status that is received by its MAC no later than September 1,
2025, in order for the 25-percent, low-volume, add-on payment
adjustment to be applied to payments for its discharges beginning on or
after October 1, 2025. If a hospital's written request for low-volume
hospital status for FY 2026 is received after September 1, 2025, and if
the MAC determines the hospital meets the criteria to qualify as a low-
volume hospital, the MAC would apply the low-volume hospital payment
adjustment to determine the payment for the hospital's FY 2026
discharges, effective prospectively within 30 days of the date of the
MAC's low-volume hospital status determination.
Under this process, a hospital that qualified for the low-volume
hospital payment adjustment for FY 2025, may continue to receive a low-
volume hospital payment adjustment for FY 2026 without reapplying if it
meet both the discharge criterion and the mileage criterion applicable
for FY 2026 (that is, the preexisting low-volume hospital qualifying
criteria as implemented in FY 2005 and specified in the existing
regulations at Sec. 412.101(b)(2)(i), as discussed previously). In
such a case, we propose that the hospital must send written
verification that is received by its MAC no later than September 1,
2025, stating that it meets the mileage criterion for FY 2026,
consistent with our process in previous years. If a hospital's request
for low-volume hospital status for FY 2026 is received after September
1, 2025, and if the MAC determines the hospital meets the criteria to
qualify as a low-volume hospital, the MAC will apply the applicable
low-volume add-on payment adjustment to determine the payment for the
hospital's discharges for the applicable portion of FY 2026, effective
prospectively within 30 days of the date of the MAC's low-volume
hospital status determination.
E. Proposed Changes in the Medicare-Dependent, Small Rural Hospital
(MDH) Program (Sec. 412.108)
1. Background for the MDH Program
Section 1886(d)(5)(G) of the Act provides special non-budget
neutral payment protections, under the IPPS, to a Medicare-dependent,
small rural hospital (MDH). MDHs are paid for their hospital inpatient
services based on the higher of the Federal rate or a blended rate
based in part on the Federal rate and in part on the MDH's hospital
specific rate. (For additional information on the MDH program and the
payment methodology, we refer readers to the FY 2012 IPPS/LTCH PPS
final rule (76 FR 51683 through 51684).) Section 2202 of the Full-Year
Continuing Appropriations and Extensions Act, 2025 (Pub. L. 119-4),
enacted on March 15, 2025, extended the MDH program through September
30, 2025 (that is, for discharges occurring before October 1, 2025).
Prior to enactment of the Full-Year Continuing Appropriations and
Extensions Act, 2025, the MDH program was only to be in effect for FY
2025 discharges occurring before April 1, 2025. Under current law, the
MDH program provisions at section 1886(d)(5)(G) of the Act will expire
for
[[Page 18273]]
discharges on or after October 1, 2025. Beginning with discharges
occurring on or after October 1, 2025, absent further Congressional
action, all hospitals that previously qualified for MDH status will be
paid based on the Federal rate.
Since the extension of the MDH program through FY 2012 provided by
section 3124 of the Affordable Care Act, the MDH program had been
extended by subsequent legislation as follows: section 606 of the
American Taxpayer Relief Act (Pub. L. 112-240) extended the MDH program
through FY 2013 (that is, for discharges occurring before October 1,
2013). Section 1106 of the Pathway for SGR Reform Act of 2013 (Pub. L.
113-67) extended the MDH program through the first half of FY 2014
(that is, for discharges occurring before April 1, 2014). Section 106
of the Protecting Access to Medicare Act (Pub. L. 113-93) extended the
MDH program through the first half of FY 2015 (that is, for discharges
occurring before April 1, 2015). Section 205 of the MACRA (Pub. L. 114-
10) extended the MDH program through FY 2017 (that is, for discharges
occurring before October 1, 2017). Section 50205 of the Bipartisan
Budget Act (Pub. L. 115-123) extended the MDH program through FY 2022
(that is for discharges occurring before October 1, 2022). Section 102
of the Continuing Appropriations and Ukraine Supplemental
Appropriations Act, 2023 (Pub. L. 117-180) extended the MDH program
through December 16, 2022. Section 102 of the Further Continuing
Appropriations and Extensions Act, 2023 (Pub. L. 117-229) extended the
MDH program through December 23, 2022. Section 4102 of the Consolidated
Appropriations Act, 2023 (Pub. L. 117-328) extended the MDH program
through FY 2024 (that is for discharges occurring before October 1,
2024). Section 307 of the CAA, 2024 (Pub. L. 118-42) extended the MDH
program through December 31, 2024 (that is, for discharges occurring
before January 1, 2025). Section 3202 of the American Relief Act, 2025
(Pub. L. 118-158) extended the MDH program through March 31, 2025 (that
is, for discharges occurring before April 1, 2025). Lastly, under
current law, section 2202 of the Full-Year Continuing Appropriations
and Extensions Act, 2025 (Pub. L. 119-4) extended the MDH program
through September 30, 2025 (that is, for discharges occurring before
October 1, 2025).
For additional information on the extensions of the MDH program
after FY 2012, we refer readers to the following Federal Register
documents: The FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through
53405 and 53413 through 53414); the FY 2013 IPPS notice (78 FR 14689);
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50647 through 50649); the
FY 2014 interim final rule with comment period (79 FR 15025 through
15027); the FY 2014 notice (79 FR 34446 through 34449); the FY 2015
IPPS/LTCH PPS final rule (79 FR 50022 through 50024); the August 2015
interim final rule with comment period (80 FR 49596); the FY 2017 IPPS/
LTCH PPS final rule (81 FR 57054 through 57057); the FY 2018 notice (83
FR 18303 through 18305); the FY 2019 IPPS/LTCH PPS final rule (83 FR
41429); the FY 2024 IPPS/LTCH PPS final rule (88 FR 59045); and the FY
2025 IPPS/LTCH PPS final rule (89 FR 69352).
2. Implementation of Legislative Extension of MDH Program
Prior to the enactment of Public Law 119-4, under section 3202 of
Public Law 118-158, the MDH program authorized by section 1886(d)(5)(G)
of the Act was set to expire on April 1, 2025. Section 2202 of Public
Law 119-4 amended sections 1886(d)(5)(G)(i) and 1886(d)(5)(G)(ii)(II)
of the Act by striking ``April 1, 2025'' and inserting ``October 1,
2025''. Section 2202 of Public Law 119-4 also made conforming
amendments to sections 1886(b)(3)(D)(i) and 1886(b)(3)(D)(iv) of the
Act.
Therefore, we are proposing to make conforming changes to the
regulations governing the MDH program at Sec. 412.108(a)(1) and
(c)(2)(iii) and the general payment rules at Sec. 412.90(j) to reflect
the extension of the MDH program through September 30, 2025.
As a result of the extension of the MDH program through September
30, 2025, as provided by section 2202 of Public Law 119-4, a provider
that was classified as an MDH as of March 31, 2025, will continue to be
classified as an MDH as of April 1, 2025, with no need to reapply for
MDH classification. We addressed the extension provided by section 3202
of the American Relief Act, 2025, in Change Request 13949 (Transmittal
13035), issued January 6, 2025. For additional information, please
refer to the transmittal https://www.cms.gov/medicare/regulations-guidance/transmittals/2025-transmittals/r13035otn. We intend to address
the extension provided by section 2202 of the Full-Year Continuing
Appropriations and Extensions Act, 2025 in forthcoming guidance.
3. Expiration of the MDH Program
Because section 2202 of the Full-Year Continuing Appropriations and
Extensions Act, 2025 extended the MDH program through September 30,
2025, only, beginning October 1, 2025, the MDH program will no longer
be in effect. Since the MDH program is not authorized by statute beyond
September 30, 2025, absent Congressional action, beginning October 1,
2025, all hospitals that previously qualified for MDH status under
section 1886(d)(5)(G) of the Act will no longer have MDH status and
will be paid based on the Federal rate.
When the MDH program was set to expire at the end of FY 2012, in
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53404 through 53405), we
revised our sole community hospital (SCH) policies to allow MDHs to
apply for SCH status in advance of the expiration of the MDH program
and be paid as such under certain conditions. We codified these changes
in the regulations at Sec. 412.92(b)(2)(i) and (v). For additional
information, we refer readers to the FY 2013 IPPS/LTCH PPS final rule
(77 FR 53404 through 53405 and 53674). We note that a MDH that
classifies as a SCH in anticipation of the MDH program expiration would
have to reapply for MDH classification in accordance with the
regulations at 42 CFR 412.108(b) and meet the classification criteria
at 42 CFR 412.108(a) in the event that the MDH program is further
extended and the provider wishes to return to its classification as a
MDH.
As noted, we are proposing to make conforming changes to the
regulations governing the MDH program at Sec. 412.108(a)(1) and
(c)(2)(iii) and the general payment rules at Sec. 412.90(j) to reflect
the extension of the MDH program through September 30, 2025. We are
further proposing that if the MDH program were to be extended by law
beyond September 30, 2025, similar to how it was extended by prior
legislation as described previously, we would, depending on timing of
such legislation in relation to the final rule, modify our proposed
conforming changes to the regulations governing the MDH program at
Sec. 412.108(a)(1) and (c)(2)(iii) and the general payment rules at
Sec. 412.90(j) to reflect any such further extension of the MDH
program. These modifications to our proposed conforming changes would
only be made if the MDH program were to be extended by statute beyond
September 30, 2025.
F. Payment for Indirect and Direct Graduate Medical Education Costs
(Sec. Sec. 412.105 and 413.75 Through 413.83)
1. Background
Section 1886(h) of the Act, as added by section 9202 of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 (Pub. L.
99-272) and
[[Page 18274]]
as currently implemented in the regulations at 42 CFR 413.75 through
413.83, establishes a methodology for determining payments to hospitals
for the direct costs of approved graduate medical education (GME)
programs. Section 1886(h)(2) of the Act sets forth a methodology for
the determination of a hospital-specific base-period per resident
amount (PRA) that is calculated by dividing a hospital's allowable
direct costs of GME in a base period by its number of full-time
equivalent (FTE) residents in the base period. The base period is, for
most hospitals, the hospital's cost reporting period beginning in FY
1984 (that is, October 1, 1983, through September 30, 1984). The base
year PRA is updated annually for inflation.
In general, Medicare direct GME payments are calculated by
multiplying the hospital's updated PRA by the weighted number of FTE
residents working in all areas of the hospital complex (and at non-
provider sites, when applicable), and the hospital's Medicare share of
total inpatient days. Section 1886(d)(5)(B) of the Act provides for a
payment adjustment known as the indirect medical education (IME)
adjustment under the IPPS for hospitals that have residents in an
approved GME program, in order to account for the higher indirect
patient care costs of teaching hospitals relative to nonteaching
hospitals. The regulations regarding the calculation of this additional
payment are located at 42 CFR 412.105. The hospital's IME adjustment
applied to the DRG payments is calculated based on the ratio of the
hospital's number of FTE residents training in either the inpatient or
outpatient departments of the IPPS hospital (and, for discharges
occurring on or after October 1, 1997, at non-provider sites, when
applicable) to the number of inpatient hospital beds.
The calculation of both direct GME payments and the IME payment
adjustment is affected by the number of FTE residents that a hospital
is allowed to count. Generally, the greater the number of FTE residents
a hospital counts, the greater the amount of Medicare direct GME and
IME payments the hospital will receive. In an attempt to end the
implicit incentive for hospitals to increase the number of FTE
residents, Congress established a limit on the number of allopathic and
osteopathic residents that a hospital could include in its FTE resident
count for direct GME and IME payment purposes in the Balanced Budget
Act of 1997 (Pub. L. 105-33). Under section 1886(h)(4)(F) of the Act,
for cost reporting periods beginning on or after October 1, 1997, a
hospital's unweighted FTE count of residents for purposes of direct GME
cannot exceed the hospital's unweighted FTE count for direct GME in its
most recent cost reporting period ending on or before December 31,
1996. Under section 1886(d)(5)(B)(v) of the Act, a similar limit based
on the FTE count for IME during that cost reporting period is applied,
effective for discharges occurring on or after October 1, 1997. Dental
and podiatric residents are not included in this statutorily mandated
cap.
2. Calculating Full-Time Equivalent Counts and Caps for Cost Reporting
Periods Other Than Twelve Months
CMS's full-time equivalent (FTE) counting regulations, as
established in the September 29, 1989, Federal Register (54 FR 40291),
specify that no individual should be counted as more than one FTE, and
that FTE status is based on the total time necessary to fill a
residency slot and the share of total time spent training at each
training site (see 42 CFR 412.105(f)(1)(iii)(A) for IME and 42 CFR
413.78(b)(1) for DGME). The requirements for what constitutes full-time
participation may vary from specialty to specialty, or among different
programs in the same specialty. Additionally, full-time equivalency may
be computed based on various increments, such as hours, days, weeks, or
months, in order for a hospital to obtain the full-time equivalent
which it is allowed to count.
Full-time equivalency for each resident is computed by determining
the portion of total allowable training time that may be claimed by
each hospital. In general, these data are sourced from a ``master''
rotation schedule for each approved residency program. Each rotation
may consist of both allowable and non-allowable training time. For
example, the time that a resident spends in a hospital's distinct-part
unit is allowable to the hospital for purposes of DGME, but not for
purposes of IME, while time spent in research activities at an offsite
nonpatient care facility is not allowable for either DGME or IME.
Additionally, a hospital cannot claim the time spent by residents
training at another hospital. Consistent with the regulations at 42 CFR
413.75(d), hospitals that cross-train residents in the same program
need to agree on the method of computing FTEs to ensure that no
resident is counted as more than one FTE.
For purposes of completing the Medicare cost report (Worksheet E,
Part A, for IME and Worksheet E-4 for DGME of Form CMS-2552-10), full-
time equivalency is typically calculated on the basis of 365 days (or
366 days, in the case of a leap year) for DGME versus the actual number
of days in the cost reporting period for IME. Thus, for a standard 12-
month cost reporting period, there is no difference in the calculation
of the DGME and IME FTE counts.
In the case of a cost reporting period other than 12 months in
length, the statute for both DGME and IME instructs the Secretary to
make ``appropriate modifications'' to ensure that the FTE counts are
based on the equivalent of 12 months. Specifically, for DGME, section
1886(h)(4)(G)(ii) states that if any cost reporting period beginning on
or after October 1, 1997, is not equal to 12 months, the Secretary
shall make appropriate modifications to ensure that the average full-
time equivalent resident counts pursuant to section 1886(h)(4)(G)(i)
are based on the equivalent of full 12-month cost reporting periods.
Similarly, for IME, section 1886(d)(5)(B)(vii) states that if any cost
reporting period beginning on or after October 1, 1997, is not equal to
12 months, the Secretary shall make appropriate modifications to ensure
that the average full-time equivalent residency count pursuant to
section 1886(d)(5)(B)(vi)(II) is based on the equivalent of full 12-
month cost reporting periods.
The procedures for determining the total DGME and IME FTE counts
for a non-12-month cost reporting period reflect the underlying
differences in the two payment methodologies. A hospital's DGME count
represents the number of FTE residents working in the healthcare
complex over the course of an entire cost reporting period, and the
total DGME payment is based on the hospital's PRA, which reflects the
average costs incurred per resident during a 12-month base period or
equivalent (see discussion at 54 FR 40290). Accordingly, the DGME FTE
count must be prorated to reflect the length of a short or long cost
reporting period, as illustrated in the following section of this
preamble. By contrast, the IME adjustment reflects the average
intensity of teaching activity in a hospital at any given time, and the
total IME payment is based on the hospital's DRG payments during a cost
reporting period. Because the size of a hospital's DRG payments already
reflects the amount of patient care furnished during a short or long
cost reporting period, it is not necessary to prorate the IME FTE count
in the same manner as the DGME FTE count.
Similarly, as explained below, proration must be applied to a
hospital's
[[Page 18275]]
DGME FTE cap (but not the IME FTE cap) to account for a non-12-month
cost reporting period, as well as to the prior- and penultimate-year
DGME FTE counts (but not the IME FTE counts) for the purpose of
calculating the three-year rolling average FTE count. We also note
that, while these methodological distinctions become apparent in the
context of calculating the counts and caps for a non-12-month cost
reporting period, they are equally applicable in the case of a standard
12-month cost reporting period.
While CMS's FTE counting policy is long-established and widely used
in existing cost reporting software and the Intern and Resident
Information System (IRIS) software, we are taking the opportunity to
restate and clarify our FTE counting policy in rulemaking. We are not
proposing any changes to the FTE counting policy at this time.
a. Calculating FTE Counts
To determine the unweighted FTE count for DGME, whether or not the
cost reporting period is 12 months, or more or less, the following
steps should be used:
For each resident and each of that resident's individual
rotations, determine the ratio of total days allowable to the hospital
in that rotation, to total days in that entire rotation, consistent
with the regulations at 42 CFR 413.78.
Multiply the ratio from Step 1 by the ratio of (total days
in the entire rotation divided by 365) (or 366, in the case of a leap
year).\224\ This represents the portion of total FTE time for this
rotation that may be claimed by the hospital for purposes of DGME
payment, prorated for the length of the cost reporting period.
---------------------------------------------------------------------------
\224\ 366 days should be used when the cost reporting period
includes February 29.
---------------------------------------------------------------------------
Calculate the sum of the products from Step 2 for all
residents and rotations in the hospital's programs to arrive at the
hospital's total unweighted DGME FTE count for the cost reporting
period.
Stated formulaically:
Unweighted DGME FTE count = Sum of [(Allowable days in a rotation/Total
days in the rotation) x (Total days in the rotation/365)]
Note: This portion of the FTE calculation is not weighted for
years outside of the Initial Residency Period, as the application of
weighting factors is a separate step in the calculation of DGME
payment on the cost report. See 42 CFR 413.79(a) for more
information about the Initial Residency Period.
Example: A resident worked in a rotation at Hospital A for 4 weeks
(28 days) but spent 1 week (7 days) offsite engaged in non-patient care
research.
Step 1: Consistent with the DGME regulations, the total
time allowable to Hospital A for this rotation is 21 days. The ratio is
(21 days/28 days) = 0.75.
Step 2: The portion of total FTE time for this rotation
that Hospital A may claim for purposes of DGME payment is 0.75 x (28/
365) = 0.06 FTE. (Note: In the case of a leap year, divide by 366
days.)
Step 3: Repeat Steps 1 and 2 for all residents and
rotations in the hospital's programs, and sum the results from Step 2
to arrive at Hospital A's total unweighted DGME FTE count for the cost
reporting period.
As stated above, 365 or 366 days is used as the denominator in Step
2 of the calculation regardless of the actual number of days in the
cost reporting period. Thus, in computing the DGME FTE count, the
length of the cost reporting period can affect the full-time
equivalency determined for a given number of residents training at the
hospital. For example, there would be fewer total rotations in a 3-
month cost reporting period than in a 12-month period, and thus a
commensurately smaller DGME count calculated in accordance with the
procedure outlined above.
Note that the hospital's updated PRA is always used and is not
prorated, as it represents that hospital's average cost to train an FTE
resident determined in a base period, and is not dependent upon the
length of cost reporting periods subsequent to the PRA base period.
In this manner, the DGME FTE count continues to be based on the
``equivalent of 12 months,'' as required by section 1886(h)(4)(G)(ii)
of the Act. This procedure is performed to determine the total
unweighted DGME FTE count on Form CMS-2552-10, Worksheet E-4, line 6
and line 7, as well as for the weighted FTE counts on lines 8 through
11, lines 15 and 16, and lines 21 and 22. For lines that record
weighted FTE counts, the appropriate weighting factors are applied
consistent with the regulations at 42 CFR 413.79(a).
As mentioned above, the procedure for determining the 12-month
equivalent IME FTE count, in accordance with section 1886(d)(5)(B)(vii)
of the Act, is different in that the number of days used in the
denominator of the calculation in Step 2 depends on the length of the
cost reporting period. For 12-month cost reporting periods, a
denominator of 365 days is used (or 366 days in the case of a leap
year), while for cost reporting periods of different lengths, the
denominator is equal to the actual number of days in the cost reporting
period. The resulting FTE count represents the average number of
residents in the hospital at any given time, and in turn is multiplied
by the DRG payments in that same cost reporting period to obtain the
hospital's total IME payment.
Accordingly, to determine the FTE count for IME, whether or not the
cost reporting period is 12 months, or more or less, the following
steps should be used:
For each resident and each of that resident's individual
rotations, determine the ratio of total days allowable to the hospital
in that rotation, to total days in that entire rotation, consistent
with the regulations at 42 CFR 412.105(f).
Multiply the ratio from Step 1 by the ratio of (total days
in the entire rotation divided by the actual number of days in the cost
reporting period). This represents the portion of total FTE time for
this rotation that may be claimed by the hospital for purposes of IME
payment.
Calculate the sum of the products from Step 2 for all
residents and rotations in the hospital's programs to arrive at the
hospital's total IME FTE count for the cost reporting period.
Stated formulaically:
IME FTE count = Sum of [(Allowable days in a rotation/Total days in the
rotation) x (Total days in the rotation/Days in cost reporting period)]
Example 1: 12-Month Cost Reporting Period (365 Days)
A resident worked in a rotation at Hospital A for 4 weeks (28 days)
but spent 1 week (7 days) offsite engaged in non-patient care research.
Step 1: Consistent with the IME regulations, the total time
allowable to Hospital A for this rotation is 21 days. The ratio is (21
days/28 days) = 0.75.
Step 2: The portion of total FTE time for this rotation that
Hospital A may claim for purposes of IME payment is 0.75 x (28/365) =
0.06 FTE. (Note: In the case of a leap year, divide by 366 days.)
Step 3: Repeat Steps 1 and 2 for all residents and rotations in the
hospital's programs, and sum the results from Step 2 to arrive at
Hospital A's total IME FTE count for the cost reporting period.
Example 2: 3-Month Cost Reporting Period (92 Days)
During a 92-day cost reporting period, a resident worked in a
rotation at Hospital A for 4 weeks (28 days) but
[[Page 18276]]
spent 1 week (7 days) offsite engaged in non-patient care research.
Step 1: Consistent with the IME regulations, the total time
allowable to Hospital A for this rotation is 21 days. The ratio is (21
days/28 days) = 0.75.
Step 2: The portion of total FTE time for this rotation that
Hospital A may claim for purposes of IME payment is 0.75 x (28/92) =
0.23 FTE.
Step 3: Repeat Steps 1 and 2 for all residents and rotations in the
hospital's programs, and sum the results from Step 2 to arrive at
Hospital A's total IME FTE count for the 3-month cost reporting period.
Consistent with the regulations at 42 CFR 412.105(b), the bed count
used in the denominator of the intern and resident to bed (IRB) ratio
is determined by counting the number of available bed days during the
cost reporting period and dividing that number by the number of days in
the cost reporting period.
While the IME FTE count itself is not prorated, the final amount of
a hospital's IME payment nonetheless will be commensurate with the cost
reporting period by virtue of the total amount of its DRG payments,
which will generally increase or decrease as a result of the length of
the period. For example, if a cost reporting period is 12 months long,
the DRG payments by which the IME adjustment factor is multiplied to
derive the total IME payment will also reflect 12 months of patient
care. By contrast, the DRG payments for the 3-month (or 92-day) cost
reporting period in Example 2 would reflect just 3 months of patient
care.
This procedure is performed to determine the total IME FTE count on
Form CMS-2552-10, Worksheet E, Part A, lines 10 through 12, as well as
the FTE counts on lines 16 and 17 and lines 24 and 25.
b. Calculating FTE Caps for Cost Reporting Periods Other Than Twelve
Months
Just as the DGME FTE counts are prorated on the basis of a standard
365- or 366-day cost reporting period, a hospital's DGME FTE cap must
similarly be prorated for cost reporting periods other than 12 months
in length. To calculate the prorated cap, the hospital's regular 12-
month DGME FTE cap is divided by 365 days (or 366 days, in the case of
a leap year) and then multiplied by the actual number of days in the
cost reporting period. For example, if a hospital has a regular DGME
FTE cap of 270 FTEs, then the prorated DGME cap for a 3-month cost
reporting period with 92 days would be: (270/365) x (92) = 68.05 FTEs.
(If the hospital subsequently had a 9-month cost report with 273 days,
the DGME FTE cap for the 9-month cost report would be calculated as
follows: (270/365) x (273) = 201.95 FTEs. Note that 68.05 + 201.95 =
270, equivalent to the total DGME cap for 12 months (totals may be
slightly off due to rounding)). Proration applies similarly to all
lines on Worksheet E-4 that are associated with the FTE cap, including
lines 1 through 5 and line 20.
For reasons similar to those explained above in the discussion of
the FTE counts, it is not necessary to prorate the IME FTE caps for a
non-12-month cost reporting period; the same IME FTE cap and any
associated cap adjustments apply to a cost reporting period that is
less than or more than 12 months.
c. Calculating the Three-Year Rolling Average for Cost Reporting
Periods of Unequal Lengths
Sections 1886(d)(5)(B)(vi)(II) and 1886(h)(4)(G)(i) of the Act
require that a hospital's FTE counts for IME and DGME payment,
respectively, in the current cost reporting period be based on a three-
year rolling average. That is, the FTE counts in the current cost
reporting period, prior cost reporting period, and penultimate cost
reporting period are summed, then divided by 3. These provisions phase
in any reductions or increases in payment over a three-year period for
hospitals that experience a change in the number of residents they
train. The regulations are at 42 CFR 412.105(f)(1)(v) for IME and 42
CFR 413.79(d)(3) for DGME.
For reasons similar to those discussed above, no adjustments need
to be made to the prior and penultimate years when calculating the
rolling average IME count. However, if the current, prior and/or
penultimate year cost reporting periods are of different lengths,
adjustments must be made to the respective DGME FTE counts so that the
rolling average is based on quantities that are comparable with one
another. Accordingly, if the current cost reporting period is other
than 12 months in length, the prior- and penultimate-year DGME FTE
counts must be prorated, yielding 3 years of comparable FTE counts from
which to calculate the rolling average:
For the prior year, take the FTE count that would be reported on
Worksheet E-4, line 12, and divide by 365 (or 366, if the prior year
cost reporting period includes February 29), and then multiply that
quotient by the number of days in the current non-12-month cost
reporting period. Report this prorated FTE count on Worksheet E-4, line
12, of the current year cost report.
For the penultimate year, take the FTE count that would be reported
on Worksheet E-4, line 13, and divide by 365 (or 366, if the
penultimate year cost reporting period includes February 29), and then
multiply that quotient by the number of days in the current non-12-
month cost reporting period. Report this prorated FTE count on
Worksheet E-4, line 13, of the current year cost report.
Stated formulaically:
Prorated DGME FTE count = [(Total annual DGME FTE count/365 or 366) x
(Number of days in current cost reporting period)]
For example, if the current year cost reporting period is 3 months
(92 days), while the prior year cost reporting period was 12 months,
and the hospital's total capped DGME FTE count in the prior year was
300, then the prorated FTE count for the prior year would be: [(300/
365) x (92)] = 75.62. That is, a DGME FTE count of 300 in a 12-month
cost reporting period would be the equivalent of 75.62 FTEs in the
current year 3-month cost reporting period. On the current year cost
report, the hospital would enter 75.62 on line 12 of Worksheet E-4
(prior year FTE count). If the total capped DGME FTE count in the
penultimate cost reporting period was 302, and the penultimate year was
also 12 months, then the prorated FTE count for the penultimate year
would be: [(302/365) x (92)] = 76.12. On the current year cost report,
the hospital would enter 76.12 on line 13 of Worksheet E-4 (penultimate
year FTE count).
We note that in this scenario, if either the prior or penultimate
year cost reporting period was also other than 12 months in length,
then it would be necessary to adjust the calculation to account for
that difference. For instance, suppose that the hospital's penultimate
year cost reporting period was 9 months or 273 days long, and its
capped DGME FTE count during that period (prorated on a 12-month basis
as described earlier in this preamble) was 225. In this case, rather
than dividing by 365 days, the hospital would divide the penultimate-
year DGME FTE count by 273 days, as follows: [(225/273) x (92)] = 75.82
FTEs. Thus, the hospital would enter 75.82 on line 13 of Worksheet E-4
of the current year cost report.
Conversely, if the current year is a full cost reporting period,
but the prior and/or penultimate cost reporting period was other than
12 months, then the prior and/or penultimate year DGME FTE counts
(which have been prorated on a 12-month basis as described earlier
[[Page 18277]]
in this preamble) must be annualized to yield 12-month equivalents.
This procedure avoids understatement (or overstatement) of the DGME FTE
count in the current year and, similar to the proration of DGME counts
in the preceding scenario, results in 3 years of comparable FTE counts
from which to calculate the DGME rolling average:
For the prior year, take the FTE count that would be reported on
Worksheet E-4, line 12, and divide by the number of days in the non-12-
month cost reporting period, and then multiply that quotient by 365 (or
366, if the current cost reporting period includes February 29). Report
this annualized FTE count on Worksheet E-4, line 12 of, the current
year cost report.
For the penultimate year, take the FTE count that would be reported
on Worksheet E-4, line 13, and divide by the number of days in the non-
12-month cost reporting period, and then multiply that quotient by 365
(or 366, if the current cost reporting period includes February 29).
Report this annualized FTE count on Worksheet E-4, line 13 of the
current year cost report.
Stated formulaically:
Annualized DGME FTE count = [(Prorated DGME FTE count/Number of days in
the non-12-month cost reporting period) x (365 or 366)]
For example, if the current year cost reporting period is 12 months
(365 days), while the prior year cost reporting period was 3 months (92
days), and the prior-year capped DGME FTE count (prorated on a 12-month
basis) was 75, then the annualized FTE count for the prior year would
be: [(75/92) x (365)] = 297.55. On the current year cost report, the
hospital would enter 297.55 on line 12 of Worksheet E-4 (prior year FTE
count).
3. Notice of Closure of Teaching Hospitals and Opportunity To Apply for
Available Slots
Section 5506 of the Patient Protection and Affordable Care Act
(Pub. L. 111-148), as amended by the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111-152) (collectively,
``Affordable Care Act''), authorizes the Secretary to redistribute
residency slots after a hospital that trained residents in an approved
medical residency program closes. Section 5506 of the Affordable Care
Act instructs the Secretary to establish a process by regulation that
redistributes slots from teaching hospitals that close to hospitals
that meet the certain criteria, with priority given to certain
hospitals including those located in the same Core Based Statistical
Area (CBSA), in a contiguous CBSA or in the same state as the closed
hospital.
Specifically, section 5506 of the Affordable Care Act amended the
Act by adding subsection (vi) to section 1886(h)(4)(H) of the Act and
modifying language at section 1886(d)(5)(B)(v) of the Act, to instruct
the Secretary to establish a process to increase the FTE resident caps
for other hospitals based upon the full-time equivalent (FTE) resident
caps in teaching hospitals that closed on or after a date that is 2
years before the date of enactment (that is, March 23, 2008). In the CY
2011 Outpatient Prospective Payment System (OPPS) final rule with
comment period (75 FR 72264), we established regulations at 42 CFR
413.79(o) and an application process for qualifying hospitals to apply
to CMS to receive direct GME and IME FTE resident cap slots from the
hospital that closed. We made certain additional modifications to Sec.
413.79 in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53434), and we
made changes to the section 5506 application process in the FY 2015
IPPS/LTCH PPS final rule (79 FR 50122 through 50134). The procedures we
established apply both to teaching hospitals that closed on or after
March 23, 2008, and on or before August 3, 2010, and to teaching
hospitals that close after August 3, 2010 (75 FR 72215).
a. Notice of Closure of Wahiawa General Hospital Located in Wahiawa,
HI, and the Application Process--Round 24
CMS has learned of the closure of Wahiawa General Hospital, located
in Wahiawa, HI (CCN 120004). Accordingly, this notice serves to notify
the public of the closure of this teaching hospital and initiate
another round (``Round 24'') of the application and selection process.
This round will be the 24th round (``Round 24'') of the application and
selection process. The table in this section of this proposed rule
contains the identifying information and IME and direct GME FTE
resident caps for the closed teaching hospital, which are part of the
Round 24 application process under section 5506 of the Affordable Care
Act.
Table V.F.-01--Wahiawa General Hospital FTE Resident Caps
----------------------------------------------------------------------------------------------------------------
IME FTE resident Direct GME FTE
cap (including resident cap
CCN Provider name City and state CBSA Terminating date MMA (including MMA Sec.
adjustments \1\) 422 adjustments)
----------------------------------------------------------------------------------------------------------------
120004.... Wahiawa General Wahiawa, HI...... 46520 April 2, 2024.... 11.67 + 5.49 sec. 12.11 + 2.20
Hospital. 422 increase = sec. 422
17.16 \2\. increase =
14.31.\3\
----------------------------------------------------------------------------------------------------------------
\1\ Section 422 of the MMA, Public Law 108-173, redistributed unused IME and direct GME residency slots
effective July 1, 2005.
\2\ Wahiawa General Hospital's 1996 IME FTE resident cap is 11.67. Under section 422 of the MMA, the hospital
received an increase of 5.49 to its IME FTE resident cap: 11.67 + 5.49 = 17.16.
\3\ Wahiawa General Hospital's 1996 direct GME FTE resident cap is 12.11. Under section 422 of the MMA, the
hospital received an increase of 2.20 to its direct GME FTE resident cap: 12.11 + 2.20 = 14.31.
b. Notice of Closure of Carney Hospital Located in Boston, MA and the
Application Process--Round 25
CMS has learned of the closure of Carney Hospital, located in
Boston, MA (CCN 220017). Accordingly, this notice serves to notify the
public of the closure of this teaching hospital and initiate another
round (``Round 25'') of the application and selection process. This
round will be the 25th round (``Round 25'') of the application and
selection process. The table in this section of this proposed rule
contains the identifying information and IME and direct GME FTE
resident caps for the closed teaching hospital, which are part of the
Round 25 application process under section 5506 of the Affordable Care
Act.
[[Page 18278]]
Table V.F.-02--Carney Hospital FTE Resident Caps
----------------------------------------------------------------------------------------------------------------
Direct GME FTE
IME FTE resident resident cap
cap (including (including MMA minus> MMA Sec.
code Sec. 422 \1\ and 422 and ACA Sec.
ACA Sec. 5503 \2\ 5503
adjustments) adjustments)
----------------------------------------------------------------------------------------------------------------
220017.... Carney Hospital. Boston, MA....... 14454 August 31, 2024.. 73.00-9.78 sec. 73.00-10.16 sec.
422 reduction- 422 reduction-
0.07 sec. 5503 1.70 sec. 5503
reduction = reduction =
63.15 \3\. 61.14.\4\
----------------------------------------------------------------------------------------------------------------
\1\ Section 422 of the MMA, Public Law 108-173, redistributed unused IME and direct GME residency slots
effective July 1, 2005.
\2\ Section 5503 of the Affordable Care Act of 2010, Public Law 111-148 and Public Law 111-152, redistributed
unused IME and direct GME residency slots effective July 1, 2011.
\3\ Carney Hospital's 1996 IME FTE resident cap is 73.00. Under section 422 of the MMA, the hospital received a
reduction of 9.78 to its IME FTE resident cap, and under section 5503 of the Affordable Care Act, the hospital
received a reduction of 0.07 to its IME FTE resident cap: 73.00-9.78-0.07 = 63.15.
\4\ Carney Hospital's 1996 direct GME FTE resident cap is 73.00. Under section 422 of the MMA, the hospital
received a reduction of 10.16 to its direct GME FTE resident cap, and under section 5503 of the Affordable
Care Act, the hospital received a reduction of 1.70 to its direct GME FTE resident cap: 73.00-10.16-1.70 =
61.14.
c. Application Process for Available Resident Slots
The application period for hospitals to apply for slots under
section 5506 of the Affordable Care Act is 90 days following notice to
the public of a hospital closure (77 FR 53436). Therefore, hospitals
that wish to apply for and receive slots from the previously noted
hospitals' FTE resident caps must submit applications using the
electronic application intake system, Medicare Electronic Application
Request Information SystemTM (MEARISTM), with
application submissions for Round 24 and 25 due no later than July 10,
2025. The section 5506 application can be accessed at: https://mearis.cms.gov/public/home.
CMS will only accept Round 24 and 25 applications submitted via
MEARISTM. Applications submitted through any other method
will not be considered. Within MEARISTM, we have built in
several resources to support applicants:
Please refer to the ``Resources'' section for guidance
regarding the application submission process at: https://mearis.cms.gov/public/resources.
Technical support is available under ``Useful Links'' at
the bottom of the MEARISTM web page.
Application related questions can be submitted to CMS
using the form available under ``Contact'' at: https://mearis.cms.gov/public/resources.
Application submission through MEARISTM will not only
help CMS track applications and streamline the review process, but it
will also create efficiencies for applicants when compared to a paper
submission process.
We have not established a deadline by when CMS will issue the final
determinations to hospitals that receive slots under section 5506 of
the Affordable Care Act. However, we review all applications received
by the application deadline and notify applicants of our determinations
as soon as possible.
We refer readers to the CMS Direct Graduate Medical Education
(DGME) website at: https://www.cms.gov/medicare/payment/prospective-payment-systems/acute-inpatient-pps/direct-graduate-medical-education-dgme. Hospitals should access this website for a list of additional
section 5506 guidelines for the policy and procedures for applying for
slots, and the redistribution of the slots under sections
1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the Act.
G. Reasonable Cost Payment for Nursing and Allied Health Education
Programs (Sec. 413.85 and Sec. 413.87)
1. General
Under section 1861(v) of the Act, Medicare has historically paid
providers for Medicare's share of the costs that providers incur in
connection with approved educational activities. The costs of these
activities are excluded from the definition of ``inpatient hospital
operating costs'' and are not included in the calculation of payment
rates for hospitals or hospital units paid under the IPPS, IRF PPS, or
IPF PPS, and are excluded from the rate-of-increase ceiling for certain
facilities not paid on a PPS. These costs are separately identified and
``passed through'' (that is, paid separately on a reasonable cost
basis).
Under the existing regulations at 42 CFR 413.85, approved nursing
and allied health (NAH) education programs must meet State licensure
requirements or be accredited by a recognized national professional
organization. Additionally, an approved NAH education program must be
operated by a provider. The most recent substantive rulemakings on
these regulations were in the January 12, 2001, final rule (66 FR 3358
through 3374), and in the August 1, 2003, final rule (68 FR 45423 and
45434). The regulations regarding Medicare Advantage (MA) add-on
payments for NAH education programs are at 42 CFR 413.87.
2. Medicare Advantage Nursing and Allied Health Education Payments
Section 541 of the Balanced Budget Refinement Act (BBRA) of 1999
provides for additional payments to hospitals for costs of nursing and
allied health education associated with services to Medicare+Choice
(now called Medicare Advantage (MA)) \225\ enrollees. Hospitals that
operate approved nursing or allied health education programs and
receive Medicare reasonable cost reimbursement for these programs may
receive additional payments to account for MA enrollees. Section 541 of
the BBRA limits total spending under the provision for MA enrollees to
no more than $60 million in any calendar year (CY). (In this document,
we refer to the total amount of $60 million or less as the payment
``pool''.) Section 541 of the BBRA also provides that direct graduate
medical education (GME) payments for Medicare+Choice (now MA)
utilization be reduced to the extent that these additional payments are
made for nursing and allied health education programs. This provision
was effective for portions of cost reporting periods occurring in a
calendar year, on or after January 1, 2000.
---------------------------------------------------------------------------
\225\ The M+C program in Part C of Medicare was renamed the
Medicare Advantage (MA) Program under the Medicare Prescription
Drug, Improvement, and Modernization Act of 2003 (MMA), which was
enacted in December 2003.
---------------------------------------------------------------------------
Section 512 of the Benefits Improvement and Protection Act (BIPA)
of 2000 changed the formula for determining the additional amounts to
be paid to hospitals for Medicare+Choice (now MA) nursing and allied
health costs. Under section 541 of the BBRA, the additional payment
amount was determined based on the proportion of each individual
hospital's nursing and allied health education payment to total nursing
and allied health education payments made to all hospitals. However,
this formula did not account for a hospital's specific Medicare+Choice
(now MA) utilization. Section 512 of the BIPA revised this
[[Page 18279]]
payment formula to specifically account for each hospital's
Medicare+Choice (now MA) utilization. This provision was effective for
portions of cost reporting periods occurring in a calendar year,
beginning with CY 2001.
The regulations at 42 CFR 413.87 implement both statutory
provisions. We first implemented the BBRA NAH Medicare+Choice (now MA)
provision in the August 1, 2000, IPPS interim final rule with comment
period (IFC) (65 FR 47036 through 47039), and subsequently implemented
the BIPA provision in the August 1, 2001 IPPS final rule (66 FR 39909
and 39910). In those rules, we outlined the qualifying conditions for a
hospital to receive the NAH Medicare+Choice (now MA) payment, how we
would calculate the NAH Medicare+Choice (now MA) payment pool, and how
a qualifying hospital would calculate its ``share'' of payment from
that pool. Determining a hospital's NAH MA payment essentially involves
applying a ratio of the hospital-specific NAH Part A payments, total
inpatient days, and MA inpatient days, to national totals of those same
variables, from cost reporting periods ending in the fiscal year that
is 2 years prior to the current calendar year. The formula is as
follows:
(((Hospital NAH pass-through payment/Hospital Part A Inpatient Days) *
(Hospital MA Inpatient Days))
divided by
((National NAH pass-through payment/National Part A Inpatient Days) *
(National MA Inpatient Days))) * Current Year Payment Pool.
With regard to determining the total national amounts for NAH pass-
through payment, Part A inpatient days, and MA inpatient days, we note
that section 1886(l) of the Act, as added by section 541 of the BBRA,
gives the Secretary the discretion to ``estimate'' the national
components of the formula noted previously. For example, section
1886(l)(2)(A) of the Act states that the Secretary shall estimate the
ratio of payments for all hospitals for portions of cost reporting
periods occurring in the year under section 1886(h)(3)(D) of the Act to
total direct GME payments estimated for the same portions of periods
under section 1886(h)(3) of the Act.
Accordingly, we stated in the August 1, 2000, IFC (65 FR 47038)
that each year, we would determine and publish in a final rule the
total amount of nursing and allied health education payments made
across all hospitals during the fiscal year 2 years prior to the
current calendar year. We would use the best available cost reporting
data for the applicable hospitals from the Hospital Cost Report
Information System (HCRIS) for cost reporting periods in the fiscal
year that is 2 years prior to the current calendar year.
To calculate the pool, in accordance with section 1886(l) of the
Act, we stated that we would ``estimate'' a total amount for each
calendar year, not to exceed $60 million (65 FR 47038). To calculate
the proportional reduction to Medicare+Choice (now MA) direct GME
payments, we stated that the percentage is estimated by calculating the
ratio of the Medicare+Choice nursing and allied health payment ``pool''
for the current calendar year to the projected total Medicare+Choice
direct GME payments made across all hospitals for the current calendar
year. We stated that the projections of Medicare+Choice direct GME and
Part A direct GME payments are based on the best available cost report
data from the HCRIS (for example, for CY 2000, the projections are
based on the best available cost report data from FY 1998 HCRIS), and
these payment amounts are increased using the increases allowed by
section 1886(h) of the Act for these services (using the percentage
applicable for the current calendar year for Medicare+Choice direct GME
and the Consumer Price Index (CPI-U) increases for Part A direct GME).
We also stated that we would publish the applicable percentage
reduction each year in the IPPS proposed and final rules (65 FR 47038).
Thus, in the August 1, 2000, IFC, we described our policy regarding
the timing and source of the national data components for the NAH
Medicare+Choice (now MA) add-on payment and the percent reduction to
the direct GME Medicare+Choice payments, and we stated that we would
publish the rates for each calendar year in the IPPS proposed and final
rules. While the rates for CY 2000 were published in the August 1,
2000, IFC (see 65 FR 47038 and 47039), the rates for subsequent CYs
were only issued through Change Requests (CRs) (CR 2692, CR 11642, CR
12407). After recent issuance of the CY 2019 rates in CR 12407 on
August 19, 2021, we reviewed our update procedures, and were reminded
that the August 1, 2000, IFC states that we would publish the NAH
Medicare+Choice (now MA) rates and direct GME percent reduction every
year in the IPPS rules. Accordingly, for CY 2020 and CY 2021, we
proposed and finalized the NAH MA add-on rates in the FY 2023 IPPS/LTCH
PPS proposed and final rules. We stated that for CYs 2022 and after, we
would similarly propose and finalize the respective NAH MA rates and
direct GME percent reductions in subsequent IPPS/LTCH PPS rulemakings
(see 87 FR 49073, August 10, 2022).
In this FY 2026 IPPS/LTCH PPS proposed rule, we are proposing the
rates for CY 2024. Consistent with the use of HCRIS data for past
calendar years, we are proposing to use data from cost reports ending
in FY 2022 HCRIS (the fiscal year that is 2 years prior to CY 2024) to
compile these national amounts: NAH pass-through payment, Part A
Inpatient Days, MA Inpatient Days.
For this proposed rule, we accessed the FY 2022 HCRIS data from the
fourth quarterly HCRIS update of 2024. However, to calculate the
``pool'' and the direct GME MA percent reduction, we ``project'' Part A
direct GME payments and MA direct GME payments for the current calendar
year, which in this proposed rule is CY 2024, based on the ``best
available cost report data from the HCRIS'' (65 FR 47038). Next,
consistent with the method we described previously in the August 1,
2000, IFC, we increase these payment amounts from midpoint to midpoint
of the appropriate calendar year using the increases allowed by section
1886(h) of the Act for these services (using the percentage applicable
for the current calendar year for MA direct GME, and the Consumer Price
Index-Urban (CPI-U) increases for Part A direct GME). For CY 2024, the
direct GME projections are based on the fourth quarterly update of CY
2022 HCRIS, adjusted for the CPI-U and for increasing MA enrollment.
For CY 2024, the proposed national rates and percentages, and their
data sources, are set forth in this table. We intend to update these
numbers in the FY 2026 final rule based on the latest available cost
report data.
------------------------------------------------------------------------
Proposed CY 2024 NAH MA rates Proposed CY 2024 Source
------------------------------------------------------------------------
NAH Pass-Through............... $281,853,426 Cost reports
ending in FY
2022 HCRIS.
Part A Inpatient Days.......... 75,303,913 Cost reports
ending in FY
2022 HCRIS.
MA Inpatient Days.............. 16,305,155 Cost reports
ending in FY
2022 HCRIS.
Part A Direct GME.............. $3,085,013,941 CY 2022 HCRIS +
CPI-U + MA
enrollment.
[[Page 18280]]
MA Direct GME.................. $2,565,628,319 CY 2022 HCRIS +
CPI-U + MA
enrollment.
Pool (not to exceed $60 $60,000,000 ((MA DGME/Part A
million). DGME) * (NAH
Pass-through)).
Percent Reduction to MA DGME 2.34% Pool/MA direct
Payments. GME.
------------------------------------------------------------------------
3. Proposed Regulatory Changes Regarding the Calculation of Net Cost of
NAH Education Programs (42 CFR 413.85(d)(2)(i) and (ii))
In the January 12, 2001, final rule (66 FR 3358), we codified the
payment regulations regarding NAH education program costs at 42 CFR
413.85. With regard to determining the net costs which are allowed for
``pass-through'' payment, 42 CFR 413.85(d)(2)(i) states that the net
cost of approved educational activities is determined by deducting the
revenues that a provider receives from tuition and student fees from
the provider's total allowable educational costs that are directly
related to approved educational activities. Section 413.85(d)(2)(ii)
further states that a provider's total allowable educational costs are
those costs incurred by the provider for trainee stipends, compensation
of teachers, and other costs of the activities as determined under the
Medicare cost-finding principles in Sec. 413.24. These costs do not
include patient care costs, costs incurred by a related organization,
or costs that constitute a redistribution of costs from an educational
institution to a provider or costs that have been or are currently
being provided through community support. Worksheet A of the Medicare
cost report captures the direct costs associated with a hospital's
various cost centers, including its NAH education programs. The direct
costs associated with operating a hospital's approved NAH education
programs are reported on Worksheet A, line 20 (nursing programs) and
line 23 (paramedical/allied health education programs). The
instructions to these lines state--
Lines 20 and 23--If you have an approved nursing or allied
health education program that meets the criteria of 42 CFR
413.85(e), classroom and clinical portions of the costs may be
allowable as pass-through costs as defined in 42 CFR 413.85(d)(2). .
. . (CMS Pub. 15-2, section 4013)
In addition to direct costs, hospitals also incur indirect or
overhead costs associated with their operations. Overhead costs are
assigned to the general service cost centers on lines 1 through 23 of
Worksheet A, which are a hospital's non-patient care/non-revenue
producing cost centers, and which include the Administrative & General
(A&G) cost center on line 5. The general cost report instructions for
Worksheet A state--
Lines 1 through 23--These lines are for the general service cost
centers. These costs are expenses incurred in operating the facility
as a whole that are not directly associated with furnishing patient
care such as, but not limited to mortgage, rent, plant operations,
administrative salaries, utilities, telephone charges, computer
hardware and software costs, etc. General service cost centers
furnish services to both general service areas and to other cost
centers in the provider (emphasis added).
Because the costs of operating a hospital's NAH education programs
are not directly associated with furnishing patient care, these cost
centers are also included among the general service cost centers on
Worksheet A. As noted in the cost report instructions cited previously,
general service cost centers may furnish services to other general
service areas. Thus, for example, a hospital's Administrative and
General cost center may furnish services to its Nursing and Allied
Health Education cost centers.
The regulations and cost report instructions require that, prior to
allocating overhead costs to the revenue producing cost centers, a
provider must make appropriate reclassifications and adjustments to its
direct costs. Worksheet A-6 is used to reclassify costs between cost
centers on the cost report, while Worksheet A-8 is used to adjust both
a provider's revenue producing and non-revenue producing cost centers,
and remove non-allowable costs. The cost report instructions for
Worksheet A-8 state, in relevant part--
Types of adjustments entered on this worksheet include (1) those
needed to adjust expenses to reflect actual expenses incurred; (2)
those items which constitute recovery of expenses through sales,
charges, fees, etc.; (3) those items needed to adjust expenses in
accordance with the Medicare principles of reimbursement; and (4)
those items which are provided for separately in the cost
apportionment process (emphasis added). (CMS Pub. 15-2, section
4016.)
Adjustments, including the recovery of expenses through various
forms of revenue, occur prior to cost finding, which is the process by
which indirect costs (that is, the costs of the general service cost
centers) are allocated to other cost centers (both other general
service cost centers and revenue producing cost centers). Worksheets B,
Part I, and B-1 have been designed to accommodate the stepdown method
of cost finding described at 42 CFR 413.24(d)(1). Certain other cost
adjustments, referred to as post-stepdown adjustments, occur after the
allocation of indirect and overhead costs and are reported separately
on Worksheet B-2.
On November 17, 2017, CMS issued Transmittal 12, which contained
updates to the hospital cost report instructions at CMS-2552-10, Pub.
15-2, chapter 40. It added the following instructions to line 19 of
Worksheet A-8:
Line 19--For each NAHE program on Worksheet A, line 20, and its
subscripts, and Worksheet A, line 23, and its subscripts, enter the
revenue adjustments (for tuition, fees, books, etc.) to be applied
against total allowable costs that are directly related to the
approved NAHE activities. Subscript this line to separately report
the revenue offset for each NAHE program reported on line 20 and
line 23. (See CMS Pub. 15-1, chapter 4, Sec. 414, and 42 CFR
413.85(d)(2)(i).)
Transmittal 12 also added to Worksheet B-2 specific instructions
for post-stepdown adjustments for certain costs associated with NAHE
non-provider-operated programs under 42 CFR 413.85(g)(2), with the
following note:
Note: Do not use this worksheet to reduce the total allowable
costs that are directly related to the NAHE programs by the revenue
received from tuition and student fees. Use Worksheet A-8 to offset
NAHE program costs by tuition and student fees (42 CFR
413.85(d)(2)(i)). Do not use a post step-down adjustment.
By issuing these cost report clarifications in Transmittal 12, CMS
was clarifying the rules regarding ensuring the appropriate order of
operations for allocations and post-stepdown adjustments of overhead to
the NAH education pass-through cost centers. Specifically, Transmittal
12 made it clear that adjustments to the direct costs of NAH education
programs as a result of revenue received from tuition, student fees and
other sources should occur on Worksheet A-8, prior to the allocation of
overhead costs, and not as post-stepdown adjustments on Worksheet B-2.
On February 9, 2024, the U.S. District Court for the District of
Columbia (D.C.) issued a decision involving five plaintiff hospitals
(Mercy Health--St. Vincent
[[Page 18281]]
Medical Center LLC d/b/a Mercy St. Vincent Medical Center, et al., v.
Xavier Becerra, Case No. 22-cv-3578 (TNM)). The providers disputed the
order of operations for determining ``net costs'' under 42 CFR
413.85(d)(2)(i). The providers disagreed with the instructions in
Transmittal 12, and argued that the offsets for revenue from tuition
and student fees should be made after indirect costs are allocated,
using Worksheet B-2, which follows the allocation of indirect costs on
Worksheet B, Part I. According to the providers, the regulations
require that indirect costs be included as part of a provider's total
allowable educational costs before tuition and student fees are offset,
and the change to the cost reporting instructions in 2017 was a change
in policy that conflicts with the regulations.
The U.S. District Court for D.C. sided with the providers, arguing
that the plain reading of the regulations text at 42 CFR
413.85(d)(2)(i) is consistent with the providers' interpretation of the
order of operations, which is to allow direct and indirect costs to be
summed, and tuition and fees to be subtracted from that sum. We
disagree with the Court's ruling and assert that the cost report
instructions at PRM 15-2 sec. 4016 are clear that revenue that is a
recovery of expenses should be offset via Worksheet A-8, prior to the
allocation of indirect costs, and that these instructions are
consistent with the regulations and Medicare cost reporting policy
broadly.
Nevertheless, in order to further clarify the regulations, we are
proposing to change the regulations text at 42 CFR 413.85(d)(2)(i) to
state that the net cost of approved educational activities is
determined as follows:
Determine allowable direct costs incurred by the provider
for trainee stipends and compensation of teachers employed by the
provider.
Subtract from allowable direct costs the revenues the
provider receives from students or on behalf of students enrolled in
the program, such as, but not limited to, tuition, student fees, or
textbooks purchased for resale.
Add indirect costs of the activities as determined under
the Medicare cost-finding principles in 42 CFR 413.24, but limited to
indirect costs that the provider itself incurs as a consequence of
operating the approved educational activities.
We note that as a result of this proposal, we would be modifying
and moving the first sentence of existing 42 CFR 413.85(d)(2)(ii),
which defines a provider's total allowable educational costs as those
costs incurred by the provider for trainee stipends, compensation of
teachers, and other costs of the activities as determined under the
Medicare cost-finding principles in Sec. 413.24, up to proposed 42 CFR
413.85(d)(2)(i). However, we are not proposing to revise the portion of
existing regulations text at 42 CFR 413.85(d)(2)(ii) which states that
the direct and indirect allowable costs of educational activities do
not include patient care costs, costs incurred by a related
organization, or costs that constitute a redistribution of costs from
an educational institution to a provider or costs that have been or are
currently being provided through community support.
The effective date of this proposed regulatory change would be cost
reporting periods beginning on or after October 1, 2025.
We understand that it is not uncommon for a provider's total
revenues from tuition, student fees and other sources to exceed the
provider's allowable direct costs of its nursing and allied health
education programs. If the default method of cost allocation is used,
the adjustments occurring on Worksheet A-8 would reduce the overhead
costs apportioned to the nursing program or allied health education
program cost centers. This is because the default statistical basis for
allocating administrative and general costs to other cost centers is
accumulated cost, which in this case would be zero. However, to
mitigate this reduction of indirect costs, providers that directly
incur legitimate overhead costs as a result of the operation of their
NAH education programs have options under current regulations to seek
permission from their MAC to employ a different allocation method that
is more suited to the types of costs they incur. Exercising these
options is at the request of the provider, and will not occur unless
the provider seeks permission from its MAC to change its allocation
method.
If a provider wishes to change its statistical allocation basis for
a particular cost center and/or the order in which the cost centers are
allocated, the provider must make a written request to its MAC in
accordance with PRM 15-1, chapter 23, section 2313. Specific to the
operation of NAH education programs, a provider may elect to subscript
its A&G cost center (line 5 of Worksheet A) for overhead costs directly
related to NAH programs and use a statistic other than accumulated
costs, which specifically relates to the NAH cost being allocated. For
example, after subscripting the A&G cost center, a provider can use
clinical rotation hours spent in each routine or ancillary area, to
compute a ratio to total clinical rotation hours for each program.
Then, to apportion staff's salaries among more than one NAH cost
center, a provider can use a ratio of the number of students enrolled
in a program to total number of students. For instance, a clinical
coordinator's salary, whose job is to schedule and manage the clinical
rotations of multiple NAHE programs, can be included in a subscripted
A&G cost center and allocated to multiple NAH programs based on the
ratio of the number of students in each NAH program to total number of
students in all of the hospital's NAH programs. Providers would thus be
able to appropriately differentiate the A&G costs to be allocated to
NAH programs from those that should not be allocated toward operation
of those programs because the statistical basis for this subscripted
cost center would be more specific to services rendered. As a result,
the amount of overhead costs that ultimately flow to the NAH cost
centers would be more accurate, albeit less than what would be
allocated if tuition and student fees were subtracted as a post-
stepdown adjustment, as argued by the providers in Mercy Health;
however, as discussed above, the providers' desired method is not
consistent with CMS's existing policy or existing cost report
instructions.
The proposed order of operations to offset revenue from direct
costs on Worksheet A-8 also is consistent with CMS policy that A&G
costs allocated to the NAH cost centers must be directly related to the
operation of specific approved programs under 42 CFR 413.85(f) and (g).
In the January 12, 2001, final rule (66 FR 3367), we clarified the
meaning of the term ``tuition'' and specified a formula for determining
the net costs to indicate that ``total costs'' includes only direct and
indirect costs incurred by a provider that are directly attributable to
the operation of an approved educational activity. We explained that
these costs do not include usual patient care costs that would be
incurred in the absence of the educational activity, such as the salary
costs for nursing supervisors who oversee the floor nurses and student
nurses. Moreover, these costs do not include costs incurred by a
related organization. We understand that a significant portion of
indirect costs that certain plaintiffs in the litigation allocated to
their nursing and allied health cost centers included costs incurred by
a related organization (such as a home office), in violation of the
regulation at 42 CFR 413.85(d)(2)(ii),
[[Page 18282]]
as well as A&G costs not directly attributable to the operation of the
NAH programs. Those A&G costs not directly incurred as a result of
operating the NAH education programs are to be paid under the IPPS, not
``passed through'' the IPPS (or other applicable hospital payment
system). For instance, costs which benefit the hospital as a whole,
such as Infection Control, Admissions, Patient Registration,
Telecommunications, etc., would generally be incurred in the absence of
a provider's NAH programs; therefore, these types of costs are not to
be allocated to the NAH program cost centers. Consequently, it is the
provider's responsibility to request permission from its MAC to use an
allocation method for overhead costs that accurately and appropriately
reflects overhead costs incurred by the provider as a direct result of
operating NAH education programs.
In summary, we are proposing to amend the regulations at 42 CFR
413.85(d)(2)(i) and (ii) as specified previously.
H. Proposed Payment Adjustment for Certain Immunotherapy Cases
(Sec. Sec. 412.85 and 412.312)
Effective for FY 2021, we created MS-DRG 018 for cases that include
procedures describing CAR T-cell therapies, which were reported using
ICD-10-PCS procedure codes XW033C3 or XW043C3 (85 FR 58599 through
58600). Effective for FY 2022, we revised MS-DRG 018 to include cases
that report the procedure codes for CAR T-cell and non-CAR T-cell
therapies and other immunotherapies (86 FR 44798 through 448106).
Effective for FY 2021, we modified our relative weight methodology
for MS-DRG 018 in order to develop a relative weight that is reflective
of the typical costs of providing CAR T-cell therapies relative to
other IPPS services. Specifically, under our finalized policy we do not
include claims determined to be clinical trial claims that group to MS-
DRG 018 when calculating the average cost for MS-DRG 018 that is used
to calculate the relative weight for this MS-DRG, with the additional
refinements that: (a) when the CAR T-cell therapy product is purchased
in the usual manner, but the case involves a clinical trial of a
different product, the claim will be included when calculating the
average cost for MS DRG 018 to the extent such claims can be identified
in the historical data; and (b) when there is expanded access use of
immunotherapy, these cases will not be included when calculating the
average cost for MS-DRG 018 to the extent such claims can be identified
in the historical data (85 FR 58600). The term ``expanded access''
(sometimes called ``compassionate use'') is a potential pathway for a
patient with a serious or immediately life-threatening disease or
condition to gain access to an investigational medical product (drug,
biologic, or medical device) for treatment outside of clinical trials
when, among other criteria, there is no comparable or satisfactory
alternative therapy to diagnose, monitor, or treat the disease or
condition (21 CFR 312.305).\226\
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\226\ https://www.fda.gov/news-events/expanded-access/expanded-access-keywords-definitions-and-resources.
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Effective FY 2021, we also finalized an adjustment to the payment
amount for applicable clinical trial and expanded access immunotherapy
cases that group to MS-DRG 018 using the same methodology that we used
to adjust the case count for purposes of the relative weight
calculations (85 FR 58842 through 58844). (As previously noted,
effective beginning FY 2022, we revised MS-DRG 018 to include cases
that report the procedure codes for CAR T-cell and non-CAR T-cell
therapies and other immunotherapies (86 FR 44798 through 448106).)
Specifically, under our finalized policy we apply a payment adjustment
to claims that group to MS-DRG 018 and include ICD-10-CM diagnosis code
Z00.6, with the modification that when the CAR T-cell, non-CAR T-cell,
or other immunotherapy product is purchased in the usual manner, but
the case involves a clinical trial of a different product, the payment
adjustment will not be applied in calculating the payment for the case.
We also finalized that when there is expanded access use of
immunotherapy, the payment adjustment will be applied in calculating
the payment for the case. This payment adjustment is codified at 42 CFR
412.85 (for operating IPPS payments) and 412.312 (for capital IPPS
payments), for claims appropriately containing Z00.6, as described
previously, and reflects that the adjustment is also applied for cases
involving expanded access use immunotherapy, and that the payment
adjustment only applies to applicable clinical trial cases; that is,
the adjustment is not applicable to cases where the CAR T-cell, non-CAR
T-cell, or other immunotherapy product is purchased in the usual
manner, but the case involves a clinical trial of a different product.
The regulations at 42 CFR 412.85(c) also specify that the adjustment
factor will reflect the average cost for cases to be assigned to MS-DRG
018 that involve expanded access use of immunotherapy or are part of an
applicable clinical trial to the average cost for cases to be assigned
to MS-DRG 018 that do not involve expanded access use of immunotherapy
and are not part of a clinical trial (85 FR 58844).
For FY 2026, we are proposing to continue to apply an adjustment to
the payment amount for expanded access use of immunotherapy and
applicable clinical trial cases that group to MS-DRG 018, calculated
using the same methodology, as modified in the FY 2024 IPPS/LTCH PPS
final rule (88 FR 59062), that we are proposing to use to adjust the
case count for purposes of the relative weight calculations, including
our proposed modifications to that methodology for FY 2026, as
described in section II.D. of the preamble of this proposed rule.
As discussed in the FY 2024 IPPS/LTCH PPS final rule, the MedPAR
claims data now includes a field that identifies whether or not the
claim includes expanded access use of immunotherapy. For the FY 2023
MedPAR data and for subsequent years, this field identifies whether or
not the claim includes condition code 90. The MedPAR files now also
include information for claims with the payer-only condition code
``ZC'', which is used by the IPPS Pricer to identify a case where the
CAR T-cell, non-CAR T-cell, or other immunotherapy product is purchased
in the usual manner, but the case involves a clinical trial of a
different product so that the payment adjustment is not applied in
calculating the payment for the case (for example, see Change Request
11879, available at https://www.cms.gov/files/document/r10571cp.pdf).
We refer the readers to section II.D. of this proposed rule for further
discussion of our methodology for identifying clinical trial claims and
expanded access use claims in MS-DRG 018 and our methodology used to
adjust the case count for purposes of the relative weight calculations,
as modified in the FY 2024 IPPS/LTCH PPS final rule, and as further
proposed to be modified for FY 2026 to identify other claims for which
the immunotherapy product was not purchased in the usual manner, such
as obtained at no cost.
In the FY 2025 IPPS/LTCH PPS final rule, we summarized a comment
requesting that CMS establish a mechanism for hospitals to report when
a product is not purchased in the usual manner, such as obtained at no
cost, for reasons other than participation in a clinical trial or
expanded access use (89 FR 69112). We indicated we may consider this
request in future
[[Page 18283]]
rulemaking. We agree that the same adjustment that applies to expanded
access use of immunotherapy and applicable clinical trial cases should
apply to other cases where the immunotherapy product is not purchased
in the usual manner, such as obtained at no cost, and therefore are
proposing that, beginning in FY 2026, the payment adjustment would also
be applied in calculating the payment for such cases. We intend to
issue billing instructions in separate guidance that would allow a
provider to indicate, for that case, that the immunotherapy product was
not purchased in the usual manner so that MACs would apply the same
adjustment to the payment amount that is applied for expanded access
use of immunotherapy and applicable clinical trial cases that group to
MS-DRG 018. We are also proposing to modify our regulations at 42 CFR
412.85 (for operating IPPS payments) and 412.312 (for capital IPPS
payments) to codify this proposed payment adjustment for other cases
where the immunotherapy product is not purchased in the usual manner,
such as obtained at no cost. Specifically, we are proposing to modify
the section heading and paragraphs (b) and (c) at 42 CFR 412.85 to
include other cases where the immunotherapy product is not purchased in
the usual manner, such as obtained at no cost, and to make additional
technical revisions to paragraph (c). We are also proposing to modify
paragraph (f) at 42 CFR 412.312 to include cases where the
immunotherapy product is not purchased in the usual manner, such as
obtained at no cost.
We also refer readers to section II.D. of the preamble of this
proposed rule for further discussion of our proposed changes to our
methodology for calculating the relative weight for MS-DRG 018 to
identify other cases where the immunotherapy product is not purchased
in the usual manner, such as obtained at no cost and to adjust the case
count for purposes of the relative weight calculations.
Using the same methodology that we are proposing to use to adjust
the case count for purposes of the relative weight calculations,
including our proposed modifications as discussed in section II.D. of
the preamble of this proposed rule, we are proposing to calculate the
adjustment to the payment amount for expanded access use of
immunotherapy, applicable clinical trial cases, and other cases where
the immunotherapy product is not purchased in the usual manner, such as
obtained at no cost as follows:
Calculate the average cost for cases assigned to MS-DRG
018 that (a) contain ICD-10-CM diagnosis code Z00.6 and do not contain
condition code ``ZC'', (b) contain condition code ``90'', or (c)
contain standardized drug charges below the median standardized drug
charge of clinical trial cases in MS-DRG 018.
Calculate the average cost for all other cases assigned to
MS-DRG 018.
Calculate an adjustor by dividing the average cost
calculated in step 1 by the average cost calculated in step 2.
Apply this adjustor when calculating payments for expanded
access use of immunotherapy, applicable clinical trial cases, and other
cases where the immunotherapy product is not purchased in the usual
manner, such as obtained at no cost, that group to MS-DRG 018 by
multiplying the relative weight for MS-DRG 018 by the adjustor.
We refer the readers to section II.D. of the preamble of this
proposed rule for further discussion of our methodology.
Consistent with our calculation of the proposed adjustor for the
relative weight calculations, for this proposed rule we are proposing
to calculate this adjustor based on the December 2024 update of the FY
2024 MedPAR file for purposes of establishing the FY 2026 payment
amount. Specifically, in accordance with proposed revised 42 CFR 412.85
(for operating IPPS payments) and 412.312 (for capital IPPS payments),
we propose to multiply the FY 2026 relative weight for MS-DRG 018 by a
proposed adjustor of 0.23 as part of the calculation of the payment for
claims determined to be applicable clinical trial claims, expanded
access use immunotherapy claims, or other cases where the immunotherapy
product is not purchased in the usual manner, such as obtained at no
cost, that group to MS-DRG 018, which includes CAR T-cell and non-CAR
T-cell therapies and other immunotherapies. We also propose to update
the value of the adjustor based on more recent data for the final rule.
K. Hospital Readmissions Reduction Program Updates and Changes
1. Regulatory Background
Section 1886(q) of the Act sets forth the requirements of the
Hospital Readmissions Reduction Program effective for discharges from
applicable hospitals beginning on or after October 1, 2012. Under the
Hospital Readmissions Reduction Program, payments to applicable
hospitals must be reduced to account for certain excess readmissions.
We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49530
through 49543) and the FY 2018 IPPS/LTCH PPS final rule (82 FR 38221
through 38240) for a general overview of the Hospital Readmissions
Reduction Program. We also refer readers to 42 CFR 412.152 through
412.154 for codified Hospital Readmissions Reduction Program
requirements.
2. Hospital Readmissions Reduction Program Measures
a. Proposal To Integrate Medicare Advantage (MA) Beneficiaries Into the
Cohorts of the Hospital Readmissions Reduction Program Measure Set
Beginning With the FY 2027 Program Year
(1) Background
In this proposed rule, we propose to adopt substantive updates to
the Hospital 30-Day, All-Cause, Risk-Standardized Readmission Rate
(RSRR) Following Acute Myocardial Infarction (AMI) Hospitalization;
Hospital 30-Day, All-Cause, RSRR Following Heart Failure (HF)
Hospitalization; Hospital 30-Day, All-Cause, RSRR Following Pneumonia
(PN) Hospitalization; Hospital-Level, 30-Day, All-Cause, RSRR Following
Chronic Obstructive Pulmonary Disease (COPD) Hospitalization; Hospital
30-Day, All-Cause, RSRR Following Total Hip Arthroplasty (THA) and
Total Knee Arthroplasty (TKA) Hospitalization; and Hospital 30-Day,
All-Cause, RSRR Following Coronary Artery Bypass Graft (CABG) Surgery
measures, hereinafter referred to as the Hospital Readmissions
Reduction Program measure set, beginning with the FY 2027 Program Year.
The proposed updates to the Hospital Readmissions Reduction Program
measure set would include integrating MA beneficiaries into each
measure's cohorts and reducing the applicable period from a three-year
period to a two-year period. In addition, we propose to make a non-
substantive modification; we would update the risk adjustment model to
use individual International Classification of Diseases (ICD)-10 codes
instead of Hierarchical Condition Categories (HCCs). For the purposes
of describing the substantive change of the Hospital Readmissions
Reduction Program measure set, we note that ``cohort'' is defined as
the hospitalizations, or ``index admissions,'' that are included when
calculating each measure. This cohort is the set of hospitalizations
that meet all the inclusion and exclusion criteria. For measure cohort
details of the most recent versions of the Hospital Readmissions
Reduction Program measure set, we refer readers to the
[[Page 18284]]
measure methodology report and measure risk adjustment statistical
model on our website at: https://qualitynet.cms.gov/inpatient/measures/readmission/methodology.
Including MA beneficiaries in hospital outcome measures would help
ensure that hospital quality would be measured across all Medicare
beneficiaries and not just the Fee-For-Service (FFS) population. In
2024, 50 percent of eligible Medicare beneficiaries--or 34.3 million
people--were covered by MA plans.\227\ It is projected that nearly two-
thirds of all Medicare enrollees will be enrolled in MA plans by
2030.\228\ Consequently, using FFS-only beneficiaries may exclude a
large segment of the focus population for quality measurement.
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\227\ Centers for Medicaid & Medicare Services. Medicare
Enrollment for September 2024 (Accessed on February 5, 2025).
Available at: https://data.cms.gov/tools/medicare-enrollment-dashboard.
\228\ Hale, J., Hong, N., Hopkins, B., et al. (2024) Health
Insurance Coverage Projections for the US Population and Sources of
Coverage, by Age, 2024-34. Health Affairs. 43(7); 922-932. https://doi.org/10.1377/hlthaff.2024.00460.
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Additionally, studies comparing readmission rates between MA and
FFS-only have shown mixed results. While several studies report lower
readmissions for MA enrollees,229 230 others have found no
difference or even higher risk-adjusted readmission rates for certain
conditions.231 232 Due to these differing research study
conclusions, adding the MA cohort to the Hospital Readmissions
Reduction Program measures would allow for a more robust and holistic
view of quality of care provided to all Medicare beneficiaries.\233\
Most importantly, the FFS and MA data in our hospital outcome measures
would empower patients and caregivers to make informed decisions about
their healthcare by giving them additional comparative data on
hospitals.
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\229\ Jacobs, P.D., Basu, J. Medicare Advantage and Post
discharge Quality: Evidence From Hospital Readmissions. American
Journal of Managed Care, 2020;26(12):524-529. Available at: https://www.ajmc.com/view/medicare-advantage-and-postdischarge-quality-evidence-from-hospital-readmissions.
\230\ Huckfeldt, P.J., Escarce, J.J., Rabideau, B., et al. Less
Intense Postacute Care, Better Outcomes for Enrollees in Medicare
Advantage Than Those in Fee-For-Service. Health Affairs.
2017;26(1):91-100. https://doi.org/10.1377/hlthaff.2016.1027.
\231\ Yayac, M.F., Harrer, S.L., Janiec, D.A., et al. Costs and
Outcomes of Medicare Advantage and Traditional Medicare
Beneficiaries After Total Hip and Knee Arthroplasty. Journal of
American Academy of Orthopedic Surgeons. 2020;28(20):e910-e916.
https://doi.org/10.5435/JAAOS-D-19-00609.
\232\ Henke, R.M., Karaca, Z., Gibson, T.B., et al. Medicare
Advantage and Traditional Medicare Hospitalization Intensity and
Readmissions. Medical Care Research and Review. 2018;75(4):434-453.
https://doi.org/10.1177%2F1077558717692103.
\233\ Panagiotou, O.A., Kumar, A., Gutman, R., et al. Hospital
Readmission Rates in Medicare Advantage and Traditional Medicare: A
Retrospective Population-Based Analysis. Annals of Internal
Medicine. 2019;171(2):99-106. https://doi.org/10.7326/M18-1795.
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(2) Overview of Measure Updates
We refer readers to the CMS Measures Inventory Tool and Hospital
Readmissions Reduction Program readmission measures specification
manuals for more information on the Hospital Readmissions Reduction
Program measure set, including background on each measure and a
complete summary of measure specifications.234 235
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\234\ CMS Measures Inventory Tool. Available at: https://cmit.cms.gov/cmit/#.
\235\ CMS Quality Net. Available at: https://qualitynet.cms.gov/inpatient/measures/readmission/methodology.
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We propose to adopt updates to the Hospital Readmissions Reduction
Program measure set in the Hospital Readmissions Reduction Program
beginning with the FY 2027 program year. The newly refined versions of
the Hospital Readmissions Reduction Program measure set would expand
the measures' inclusion criteria to include MA beneficiaries.
Currently, the measure denominator for the Hospital Readmissions
Reduction Program measure set includes beneficiaries ``Enrolled in
Medicare FFS Part A and Part B for the first 12 months prior to the
date of admission and enrolled in Part A during the index admission.''
\236\ We propose to modify the measure cohort to ``Enrolled in Medicare
FFS and/or MA for the 12 months prior to the date of admission; and
enrolled in FFS or MA during the index admission.'' \237\ The addition
of MA data to the measure doubles the cohort size and more accurately
reflects the quality of care for both FFS and MA beneficiaries.
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\236\ CMS Measures Inventory Tool. Available at: https://cmit.cms.gov/cmit/#.
\237\ 2024 Measures Under Consideration List. Available at:
https://mmshub.cms.gov/2024/2024-11/2024-measures-under-consideration-list-now-available.
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We are also providing a non-substantive update which would re-
specify the risk model for each measure to primarily use individual
ICD-10 codes, leveraging the specificity of individual ICD-10 coding in
place of the previously used HCCs. This technical update would improve
the performance of the risk adjustment models for condition- and
procedure-specific mortality and complication measures.\238\ We refer
readers to the CMS Measures Management System for more on the list of
ICD-10 codes used in the risk adjustment model, available at: https://mmshub.cms.gov/measure-lifecycle/measure-implementation/pre-rulemaking/lists-and-reports/2024-MUC-List-materials.
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\238\ Krumholz, H.M., Coppi, A.C., Warner, F., et al.
Comparative effectiveness of new approaches to improve mortality
risk models from Medicare claims data. JAMA Network Open.
2019;2(7):e197314-e197314 Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC6647547/.
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(3) Pre-Rulemaking Process and Measure Endorsement
(a) Recommendation From the PRMR Process
We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR
69457 through 69458) for details on the Pre-Rulemaking Measure Review
(PRMR) process, including the voting procedures that the PRMR process
uses to reach consensus on measure recommendations. The PRMR Hospital
Committee, comprised of the PRMR Hospital Advisory Group and PRMR
Hospital Recommendation Group, reviewed the proposed updated versions
of the Hospital Readmissions Reduction Program measure set. Consensus
is reached when there is 75 percent or higher agreement among members
of a committee.\239\ The PRMR Hospital Recommendation Group reviewed
the proposed updated Hospital Readmissions Reduction Program measure
set specifications (MUC2024-030, MUC2024-032, MUC2024-040, MUC2024-041,
MUC2024-045, MUC2024-046) during a meeting on January 16, 2025, to vote
on a recommendation about use of these measures for the Hospital
Readmissions Reduction Program.\240\
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\239\ Battelle--Partnership for Quality Measurement. (February
2025). Guidebook of Policies and Procedures for Pre-Rulemaking
Measure Review (PRMR) and Measure Set Review (MSR). Available at:
https://p4qm.org/sites/default/files/2024-12/Final-Draft-Multi-Stakeholder-Group-Guidebook-of-Policies-and-Procedures.pdf.
\240\ Battelle--Partnership for Quality Measurement. (February
2025). PRMR 2024 MUC Recommendations Spreadsheet Final. Available
at: https://p4qm.org/PRMR/Resources.
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The PRMR Hospital Recommendation Group reached consensus for each
of the measures. For each measure, they voted to recommend the addition
of MA data to each measure, with conditions.\241\
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\241\ Battelle--Partnership for Quality Measurement. (February
2025). PRMR 2024 MUC Recommendations Spreadsheet Final. Available
at: https://p4qm.org/media/3891.
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The voting results of the PRMR Hospital Recommendation Group for
the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following
AMI Hospitalization measure were: 18 members of the group recommended
adopting the updates without
[[Page 18285]]
conditions; 9 members recommended adoption with conditions; and 0
members voted not to recommend the updates for adoption. Taken
together, 100 percent of the votes were between ``recommend'' and
``recommend with conditions.'' Thus, the committee reached consensus
and recommended with conditions the updates to the Hospital 30-Day,
All-Cause, RSRR Following AMI Hospitalization measure.
The voting results of the PRMR Hospital Recommendation Group for
the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following
HF Hospitalization measure were: 17 members of the group recommended
adopting the updates without conditions; 10 members recommended
adoption with conditions; and 0 members voted not to recommend the
updates for adoption. Taken together, 100 percent of the votes were
between ``recommend'' and ``recommend with conditions.'' Thus, the
committee reached consensus and recommended with conditions the updates
to the Hospital 30-Day, All-Cause, RSRR Following HF Hospitalization
measure.
The voting results of the PRMR Hospital Recommendation Group for
the proposed updates to the Hospital-Level, 30-Day, All-Cause, RSRR
Following COPD Hospitalization measure were: 18 members of the group
recommended adopting the updates without conditions; 9 members
recommended adoption with conditions; and 0 members voted not to
recommend the updates for adoption. Taken together, 100 percent of the
votes were between ``recommend'' and ``recommend with conditions.''
Thus, the committee reached consensus and recommended with conditions
the updates to the Hospital-Level, 30-Day, All-Cause, RSRR Following
COPD Hospitalization measure.
The voting results of the PRMR Hospital Recommendation Group for
the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following
THA and/or TKA Hospitalization measure were: 19 members of the group
recommended adopting the updates without conditions; 7 members
recommended adoption with conditions; and 1 member voted not to
recommend the updates for adoption. Taken together, 96 percent of the
votes were between ``recommend'' and ``recommend with conditions.''
Thus, the committee reached consensus and recommended with conditions
the updates to the Hospital 30-Day, All-Cause, RSRR Following THA and/
or TKA Hospitalization measure.
The voting results of the PRMR Hospital Recommendation Group for
the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following
PN Hospitalization measure were: 17 members of the group recommended
adopting the updates without conditions; 10 members recommended
adoption with conditions; and 0 members voted not to recommend the
updates for adoption. Taken together, 100 percent of the votes were
between ``recommend'' and ``recommend with conditions.'' Thus, the
committee reached consensus and recommended with conditions the updates
to the Hospital 30-Day, All-Cause, RSRR Following PN Hospitalization
measure.
The voting results of the PRMR Hospital Recommendation Group for
the proposed updates to the Hospital 30-Day, All-Cause, RSRR Following
CABG Surgery measure were: 19 members of the group recommended adopting
the updates without conditions; 8 members recommended adoption with
conditions; and 0 members voted not to recommend the updates for
adoption. Taken together, 100 percent of the votes were between
``recommend'' and ``recommend with conditions.'' Thus, the committee
reached consensus and recommended with conditions the updates to the
Hospital 30-Day, All-Cause, RSRR Following CABG Surgery measure.
The measure set was discussed as a group during the Hospital
Recommendation Group meeting, with committee members providing
recommendations that spanned across measures. The conditions submitted
included: revising the inclusion criteria to include care provided in
ambulatory settings; stratification of measure data by MA and FFS;
consideration of a shorter 7- or 14-day readmission time period; and
conducting additional testing to evaluate whether the measure is topped
out for all subgroups reporting.
After taking these conditions into account, we propose to adopt the
updated Hospital Readmissions Reduction Program measure set in the
Hospital Readmissions Reduction Program. We note that the conditions
were not specific to the addition of MA data into the measures but
addressed the measures in totality. Therefore, we will review the
applicability of stratifying the measures by MA or FFS data and provide
that information through the confidential feedback reports for
hospitals. We will also evaluate the readmission metrics to a shorter
7- or 14-day readmission time period and review the criteria to include
care provided in ambulatory settings and its applicability to each
measure. We continue to review each measure's topped out status through
our internal measure evaluation reports.
(b) Measure Endorsement
We refer readers to FY 2025 IPPS/LTCH PPS final rule (89 FR 69457
through 69458) for details on the endorsement and maintenance (E&M)
process including the procedures the CBE's E&M Committees use to
evaluate measures and whether they meet endorsement criteria. The
currently implemented version of these measures in the Hospital
Readmissions Reduction Program were previously evaluated and endorsed
by the CBE.\242\ The proposed updated measures that include MA
beneficiaries in the patient cohorts will each be considered for future
endorsement.
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\242\ Hospital 30-Day, All-Cause, RSRR Following PN
Hospitalization (CBE #0506), Hospital 30-Day, All-Cause, RSRR
Following HF Hospitalization (CBE #0330), Hospital 30-Day, All-
Cause, RSRR Following THA and/or TKA Hospitalization (CBE #1551),
Hospital 30-Day, All-Cause, RSRR Following CABG Surgery (CBE #2515),
Hospital-Level, 30-Day, All-Cause, RSRR Following COPD
Hospitalization (CBE #1891), and Hospital 30-Day, All-Cause, RSRR
Following AMI Hospitalization (CBE #0505) can all be found at
https://cmit.cms.gov/cmit/#/MeasureInventory.
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(4) Data Submission and Reporting
The proposed updated Hospital Readmissions Reduction Program
measure set would use index admission diagnoses and in-hospital
comorbidity data from Medicare FFS Part A, MA claims/encounters, or
both. Additional comorbidities prior to the index admission are
assessed using Part A and Part B Medicare claims, MA encounters in the
12 months prior to index (initial) admission. A patient's Medicare FFS
or MA enrollment status would be obtained from the Medicare enrollment
data which contains beneficiary demographic, benefit/coverage, and
vital status information. We propose to use claims and encounter data
with admission dates beginning from July 1, 2023, through June 30,
2025, which is associated with the FY 2027 program year. By using CMS
administrative data, hospitals would not be required to submit
additional data for calculating the measures. If these measure updates
are finalized, we would continue to publicly report readmission rates
by posting the readmission measure results for the applicable
conditions for a fiscal year for each applicable hospital on the
Compare tool or successor website(s), currently available at https://www.medicare.gov/care-compare/, and on the Provider Data Catalog,
available
[[Page 18286]]
at https://data.cms.gov/provider-data/, as codified at Sec.
412.154(f).
We invite public comment on this proposal.
b. Technical Updates to the Specifications of the Hospital Readmissions
Reduction Program Measures Beginning With the FY 2027 Program Year
During the COVID-19 public health emergency (PHE), in the FY 2022
IPPS/LTCH PPS final rule (86 FR 45256 through 45258), we updated the
Hospital 30-Day All-Cause RSRR Following AMI Hospitalization; Hospital
30-Day, All-Cause, RSRR Following CABG Surgery; Hospital-Level, 30-Day,
All-Cause, RSRR Following COPD Hospitalization; Hospital 30-Day, All-
Cause, RSRR Following HF Hospitalization; and Hospital 30-Day, All-
Cause, RSRR Following THA and/or TKA Hospitalization measures to
exclude patients diagnosed with COVID-19, including a primary or
secondary diagnosis present on admission (POA) of COVID-19, from both
index admissions and readmissions (86 FR 45257 through 45258). In the
FY 2023 IPPS/LTCH PPS final rule, we provided an update regarding the
technical specifications for the Hospital 30-Day, All-Cause, RSRR
Following PN Hospitalization measure to exclude patients with either
principal or secondary diagnosis POA of COVID-19 from both index
admissions and readmissions (87 FR 49083 through 49086). Additionally,
in the FY 2023 IPPS/LTCH PPS final rule, we modified the technical
measure specifications of each of the six readmission measures to
include a covariate adjustment for patient history of COVID-19 in the
12 months prior to the admission beginning with the FY 2023 program
year (87 FR 49086 through 49088).
We stated that we were making these updates pursuant to the
technical updates policy we finalized in the FY 2015 IPPS/LTCH final
rule. Under this policy, we finalized a subregulatory process to
incorporate technical measure specification updates into the measure
specifications we had previously adopted for the Hospital Readmissions
Reduction Program (79 FR 50039). We reiterated this policy in the FY
2020 IPPS/LTCH final rule, stating our continued belief that the
subregulatory process is the most expeditious manner possible to ensure
that quality measures remain fully up to date while preserving the
public's ability to comment on updates that so fundamentally change a
measure that it is no longer the same measure that we originally
adopted (84 FR 42385 through 42387).
We are providing notice in this proposed rule that we intend to
remove the COVID-19 exclusion from the readmission measures beginning
with the FY 2027 program year. This technical update will modify these
readmission measures to remove the exclusion of COVID-19 diagnosed
patients from the index admissions and readmissions, including the
removal of the exclusion of certain ICD-10 Codes that represented
patients with a secondary diagnosis of COVID-19, and the history of
COVID-19 risk variable.
The exclusion began as a response to the COVID-19 PHE which expired
May 11, 2023. We believe that hospitals have had adequate time to
adjust to the presence of COVID-19 as an ongoing virus. Using data from
the last four years, July 2020-June 2024, our internal analysis showed
a decline over time of the number of patients excluded from the various
measure cohorts. Therefore, we believe that removing the exclusion of
COVID-19 patients will ensure that these readmission measures continue
to account for readmissions as intended and meet the goals of the
Hospital Readmissions Reduction Program.
Additional resources about current measure technical specifications
and the methodology for the Hospital Technical specification of the
current readmission measures are provided at our website in the Measure
Methodology Reports (available at: https://qualitynet.cms.gov/inpatient/measures/readmission/methodology). Hospital Readmissions
Reduction Program resources are located at the Resources web page of
the QualityNet website (available at: https://qualitynet.cms.gov/inpatient/hrrp/resources). An updated measure methodology report will
be made available in May 2026.
3. Additional Policies for the Hospital Readmissions Reduction Program
a. Proposal To Modify the Applicable Period for the Hospital
Readmissions Reduction Program Measures Set
We propose to modify the definition of ``applicable period'' as
specified at Sec. 412.152. Currently, the ``applicable period'' is the
3-year period from which data are being collected to calculate excess
readmission ratios (ERRs) and payment adjustment factors for the fiscal
year; this includes aggregate payments for excess readmissions and
aggregate payments for all discharges used in the calculation of the
payment adjustment. In the FY 2013 IPPS/LTCH PPS final rule, we noted
that the 3-year period provided an increase the number of cases per
hospital used for measure calculation, which improved the precision of
each hospital's readmission estimate (77 FR 53379 through 53382). The
``applicable period for dual eligibility'' is the same as the
``applicable period'' that we otherwise adopted for purposes of the
Hospital Readmissions Reduction Program.
However, we now propose to reduce the applicable period from 3 to 2
years. The proposed update would allow for more recent data when
assessing performance. With the proposed inclusion of MA patients in
the cohort, we assessed whether the reliability of the measures could
reach a satisfactory level when the applicable period is shortened. In
testing, all measures showed better between-hospital variance using the
2-year FFS and MA combined cohort as compared to the current measure
specifications of a 3-year applicable period and the FFS-only cohort.
Beginning in FY 2027, we propose that the ``applicable period'' for
the Hospital Readmissions Reduction Program would be the 2-year period
beginning 1 year advanced from the previous program fiscal year's start
of the ``applicable period.'' For example, for the FY 2027 program
determination, claims/encounter data with admission dates beginning
from July 1, 2023, through June 30, 2025, would be used.
Under this proposed policy, for all subsequent years, we would
advance this 2-year period by 1 year unless otherwise specified by the
Secretary, which we would revise through notice and comment rulemaking.
Similarly, the ``applicable period for dual eligibility'' would
continue to correspond to the ``applicable period'' for the Hospital
Readmissions Reduction Program, unless otherwise specified by the
Secretary.
We invite public comment on this proposal.
b. Proposal To Identify Aggregate Payments for Each Condition/Procedure
and All Discharges for FY 2027 and Subsequent Years
When calculating the numerator (aggregate payments for excess
readmissions), we determine the base operating DRG payment amount for
an individual hospital for the applicable period for each condition/
procedure using Medicare FFS inpatient claims from the MedPAR file with
discharge dates that are within the applicable period. Under our
established methodology, we use the update of the MedPAR file for each
Federal fiscal year, which is updated 6 months after the end of each
Federal fiscal year
[[Page 18287]]
within the applicable period, as our data source.
In identifying discharges for the applicable conditions/procedures
to calculate the aggregate payments for excess readmissions, we apply
the same exclusions to the claims in the MedPAR file as are applied in
the measure methodology for each of the applicable conditions/
procedures. For example, for the FY 2025 applicable period, this
included the discharge diagnoses for each applicable condition/
procedure based on the list of specific ICD-10-CM and ICD-10-PCS code
sets, as applicable, for that condition/procedure, as specified in the
2024 version of the measure methodology reports.
In this proposed rule, we propose to include payment data for
Medicare FFS and MA beneficiaries that meet the criteria as previously
described for each applicable condition/procedure to calculate the
aggregate payments for excess readmissions. We will rely on the MedPAR
and/or the latest available data source that would provide the most up-
to-date comprehensive information on payment information for Medicare
FFS and MA beneficiaries. This proposal results from our proposal to
include MA beneficiaries in the Hospital Readmissions Reduction Program
measure set cohorts.
We note that Sec. 412.152 defines the terms ``aggregate payments
for excess readmissions'' and ``excess readmissions ratio'' (ERR)
broadly enough to allow us to include MA beneficiaries in the
calculation without requiring us to revise the regulatory definition.
(1) Analysis of Proposed Changes Impact on Aggregate Payments
To assess the expected impact on hospital payment adjustments
resulting from the changes to the readmission measures, the
``applicable period'', and calculations for aggregate payments for
excess readmissions, we estimated hospitals' payment adjustment factors
using the proposed measures updates to include MA data, the proposed
two-year applicable period, and the proposed updates to the
calculations for aggregate payments for each condition/procedure to
include MA data. Later in this section we show the estimated total
Medicare savings under the current payment adjustment factor
calculations and the proposed payment adjustment factor calculations
which would use a two-year applicable period and include MA data in the
ERR calculations and calculations for aggregate payments for each
condition/procedure. Based on our analysis, the estimated average
change in Medicare savings per hospital from the proposed updates was
$15,579, with 1,424 hospitals having a greater penalty amount and 1,547
hospitals having the same or lower penalty amount.
Table VI.K-01--Estimated Total Medicare Savings of Proposed Addition of MA Cohort to Hospital Readmissions Reduction Program Measure Set
--------------------------------------------------------------------------------------------------------------------------------------------------------
Difference between Percentage difference
Current Proposed proposed updates and between proposed updates
methodology updates current methodology and current methodology
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated total Medicare savings.................................. $316,131,336 $357,264,092 $41,132,756 13
Number of penalized hospitals..................................... 2,342 2,417 75 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Our analysis also assesses the impact of the proposed updates to
the number of eligible hospitals, number and percentage of penalized
hospitals, and penalties as a share of payments overall and by hospital
characteristics. The first and fifth columns in the below table
indicates the total number of hospitals eligible for a penalty under
the Hospital Readmissions Reduction Program. In FY 2025, approximately
3,000 subsection (d) hospitals were included in the Hospital
Readmissions Reduction Program. Poorly performing hospitals included in
the program may receive a penalty if they are non-Maryland subsection
(d) hospitals with 25 or more eligible discharges for at least one
measure during the applicable period. The second and sixth columns in
the table indicates the total number of non-Maryland hospitals with
available data for each characteristic that have an estimated payment
adjustment factor less than 1 (that is, penalized hospitals). The third
and seventh columns in the table indicates the estimated percentage of
penalized hospitals among those eligible to receive a penalty by
hospital characteristic. The fourth and eighth columns in the table
estimate the financial impact on hospitals by hospital characteristic,
referred to as the penalty as a share of payments. The penalty as a
share of payments is calculated as the sum of penalties for all
hospitals with that characteristic over the sum of all base operating
DRG payments for those hospitals. For example, under the current
methodology, the penalty as a share of payments for urban hospitals is
0.42 percent, and with the proposed updates, the penalty as a share of
payments for urban hospitals is 0.46 percent. This means that total
penalties for all urban hospitals is 0.42 percent of total payments for
urban hospitals under the current methodology and 0.46 percent with the
proposed updates. Measuring the financial impact on hospitals as a
percentage of total base operating DRG payments accounts for
differences in the amount of base operating DRG payments for hospitals
with the characteristic when comparing the financial impact of the
program on different groups of hospitals.
Table VI.K-02--Comparison of Proposed Updates to Current Methodology in Hospital Readmissions Reduction Program by Hospital Characteristic
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current methodology (FY 2025 results: FFS only and 3- Proposed updates (adding MA stays and 2-year
year performance period) performance period)
-------------------------------------------------------------------------------------------------------------
Hospital characteristic Number of Number of Percentage Penalty as a Number of Number of Percentage Penalty as a
eligible penalized of hospitals share of eligible penalized of hospitals share of
hospitals hospitals penalized payments (%) hospitals hospitals penalized payments (%)
\a\ \b\ (%) \c\ \d\ \a\ \b\ (%) \c\ \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Hospitals............................. 2,828 2,342 82.81 0.42 2,868 2,417 84.27 0.46
By Geographic Location:
Urban hospitals........................... 2,164 1,836 84.84 0.42 2,201 1,901 86.37 0.46
[[Page 18288]]
1-99 beds............................. 505 336 66.53 0.39 518 353 68.15 0.46
100-199 beds.......................... 624 549 87.98 0.48 637 574 90.11 0.53
200-299 beds.......................... 397 368 92.70 0.48 406 374 92.12 0.56
300-399 beds.......................... 268 250 93.28 0.43 269 249 92.57 0.47
400-499 beds.......................... 123 112 91.06 0.46 123 121 98.37 0.47
500 or more beds...................... 247 221 89.47 0.34 248 230 92.74 0.37
Rural hospitals........................... 664 506 76.20 0.41 667 516 77.36 0.45
1-49 beds............................. 312 203 65.06 0.31 315 213 67.62 0.36
50-99 beds............................ 186 151 81.18 0.46 186 151 81.18 0.48
100-149 beds.......................... 92 82 89.13 0.39 92 84 91.30 0.46
150-199 beds.......................... 44 41 93.18 0.43 44 40 90.91 0.59
200 or more beds...................... 30 29 96.67 0.40 30 28 93.33 0.35
By Teaching Status: \e\
Non-teaching.......................... 1,634 1,280 78.34 0.45 1,651 1,308 79.22 0.50
Fewer than 100 residents.............. 910 806 88.57 0.44 932 837 89.81 0.48
100 or more residents................. 284 256 90.14 0.36 285 272 95.44 0.39
By Ownership Type:
Government............................ 403 313 77.67 0.29 408 340 83.33 0.31
Proprietary........................... 636 519 81.60 0.55 637 511 80.22 0.64
Voluntary............................. 1,789 1,510 84.40 0.41 1,822 1,565 85.89 0.45
By Safety-net Status: \f\
Safety-net hospitals.................. 2,284 1,889 82.71 0.44 2,312 1,945 84.13 0.47
Non-safety-net hospitals.............. 544 453 83.27 0.34 556 472 84.89 0.42
By Disproportionate Share Hospital (DSH)
Patient Percentage: \g\
0-24.................................. 1,058 828 78.26 0.48 1,079 880 81.56 0.53
25-49................................. 1,469 1,273 86.66 0.39 1,478 1,279 86.54 0.42
50-64................................. 177 147 83.05 0.36 181 150 82.87 0.49
65 and over........................... 124 94 75.81 0.43 130 108 83.08 0.53
By Medicare Cost Report (MCR) Percentage:
\h\
0-24.................................. 1,183 995 84.11 0.33 1,224 1,041 85.05 0.40
25-49................................. 1,572 1,296 82.44 0.48 1,569 1,325 84.45 0.50
50-64................................. 62 43 69.35 0.75 61 39 63.93 0.75
65 and over........................... 10 7 70.00 0.29 11 9 81.82 1.21
By Region:
New England........................... 122 106 86.89 0.64 123 115 93.50 0.60
Middle Atlantic....................... 313 287 91.69 0.46 318 293 92.14 0.56
East North Central.................... 444 379 85.36 0.43 446 387 86.77 0.49
West North Central.................... 228 172 75.44 0.23 227 184 81.06 0.38
South Atlantic........................ 483 421 87.16 0.46 489 439 89.78 0.47
East South Central.................... 253 210 83.00 0.47 257 221 85.99 0.42
West South Central.................... 425 342 80.47 0.39 425 315 74.12 0.38
Mountain.............................. 211 151 71.56 0.31 212 150 70.75 0.30
Pacific............................... 349 274 78.51 0.34 371 313 84.37 0.42
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Proposed Updates results based on: preliminary MA-FFS readmission measure results that were available using data from January 1, 2022, through
December 31, 2023, and include non-HRRP hospitals (such as CAHs) in the estimation of ERRs; MA-FFS DRG ratios and dual proportions from July 1, 2021,
through June 30, 2023. The Current Methodology results are the actual FY 2025 results using data from July 1, 2020, through June 30, 2023. Both
analyses use MedPAR data from October 1, 2022, through September 30, 2023 (FY 2023), to calculate the payment adjustment as a proportion of total base
operating DRG payments. Both analyses use data from the FY 2025 proposed rule impact file for hospital characteristics data. The number of hospitals
with each characteristic may not sum to the total number of hospitals due to some hospitals having missing characteristic data in the impact file.
This table only includes results for hospitals who are eligible for a penalty under the program on the basis of having at least 25 eligible discharges
for at least one measure. The average share of penalties as a percentage of all DRG payments is calculated as the sum of all Medicare savings for the
group of hospitals divided by total base operating DRG payments for all hospitals in that group.
\a\ This column is the number of applicable hospitals within the characteristic that are eligible for a penalty (that is, they have 25 or more eligible
discharges for at least one measure).
\b\ This column is the number of applicable hospitals that are penalized (that is, they have 25 or more eligible discharges for at least one measure and
an estimated payment adjustment factor less than 1) within the characteristic.
\c\ This column is the percentage of applicable hospitals that are penalized among hospitals that are eligible to receive a penalty by characteristic.
\d\ This column is calculated as the sum of all penalties for the group of hospitals with that characteristic divided by total base operating DRG
payments for all those hospitals. Measuring the financial impact on hospitals as a percentage of total base operating DRG payments in this way allows
for comparisons across hospital characteristics that accounts for differences in the amount of base operating DRG payments for different groups of
hospitals. MedPAR data from October 1, 2022, through September 30, 2023 (FY 2023), are used to estimate the total base operating DRG payments.
\e\ A hospital is considered a teaching hospital if it has an Indirect Medical Education adjustment factor for Operation PPS (TCHOP) greater than zero.
\f\ A hospital is considered a safety-net hospital if it is in the top DSH quintile.
\g\ DSH patient percentage is the sum of the percentage of Medicare inpatient days attributable to patients eligible for both Medicare Part A and
Supplemental Security Income (SSI), and the percentage of total inpatient days attributable to patients eligible for Medicaid but not Medicare Part A.
\h\ MCR (Medicare Cost Report) percentage is the percentage of total inpatient stays from Medicare patients.
[[Page 18289]]
We invite public comment on this proposal.
c. Proposal To Update and Codify the Extraordinary Circumstance
Exception (ECE) Policy for the Hospital Readmissions Reduction Program
(1) Background
Under our current Extraordinary Circumstances Exception (ECE)
regulations, we have granted exceptions to exclude data from Hospital
Readmissions Reduction Program payment reduction calculations (FY 2016
IPPS/LTCH PPS final rule, 80 FR 49542 through 49543). An exception may
be granted for extraordinary circumstances including, but not limited
to, natural disasters or systemic problems with CMS data collection
systems that directly affected the ability of facilities to submit
data.\243\ We refer readers to the FY 2016 IPPS/LTCH PPS final rule (80
FR 49542 through 49544); FY 2018 IPPS/LTCH PPS final rule (82 FR 38239
through 38240), and FY 2022 IPPS/LTCH PPS final rule (86 FR 45260
through 45262) for further background and details of our ECE policy. We
also refer readers to the QualityNet website for the specific
requirements for submission of an ECE request in the Hospital
Readmissions Reduction Program.\244\ Hospitals can request a CMS
Quality Program ECE for multiple programs based on the same
extraordinary circumstance using one ECE request form, including the
Hospital Inpatient Quality Reporting (IQR) Program, the Hospital VBP
Program, and the HAC Reduction Program.
---------------------------------------------------------------------------
\243\ Centers for Medicare & Medicaid Services (CMS) Quality
Program Extraordinary Circumstances Exceptions (ECE) Request Form.
(2025). QualityNet. Available at: https://qualitynet.cms.gov/files/677e843f50ed8df7419f60e1?filename=HQR_ECE_Req_Form_CY_2025.pdf.
\244\ CMS QualityNet. Available at: https://qualitynet.cms.gov/inpatient/hrrp/participation#tab2.
---------------------------------------------------------------------------
Our ECE policy provides flexibility for Hospital Readmissions
Reduction Program participants to ensure continuity of quality care
delivery and measure reporting in the event of an extraordinary
circumstance. For instance, we recognize that, in circumstances where
an exclusion of data from the calculation of a hospital's payment
reduction for the applicable period is not applicable, it is beneficial
for a hospital to submit data for use in payment reduction calculations
later than the Hospital Readmissions Reduction Program data submission
deadline. Delayed data submission for use in payment reduction
calculations authorized under the ECE policy would allow temporary
relief for a hospital experiencing an extraordinary circumstance while
preserving data reporting such as transparency and informed decision-
making for beneficiaries and providers alike. Accordingly, we propose
to update our regulations to specify that an ECE could take the form of
an extension of time for a hospital to comply with a data reporting
requirement if CMS determines that this type of relief would be
appropriate under the circumstances.
(2) Proposals To Update and Codify the Extraordinary Circumstances
Exception (ECE) Policy for the Hospital Readmissions Reduction Program
We propose to update and codify our ECE policy at 42 CFR 412.154(d)
to include extensions of time as a form of relief and to further
clarify the policy. Specifically, at proposed Sec. 412.154(d)(1), we
propose that CMS may grant an ECE with respect to reporting
requirements in the event of an extraordinary circumstance--defined as
an event beyond the control of a hospital (for example a natural or
man-made disaster such as a hurricane, tornado, earthquake, terrorist
attack, or bombing)--that affected the ability of the hospital to
comply with one or more applicable reporting requirements with respect
to a fiscal year.
We propose that the process for requesting or granting an ECE will
remain the same as the current ECE process, detailed by CMS at the
QualityNet website or a successor website.\245\ At proposed Sec.
412.154(d)(2)(i), we propose that a hospital may request an ECE within
30 calendar days of the date that the extraordinary circumstance
occurred. Under this proposed policy, we clarify that CMS retains the
authority to grant an ECE as a form of relief at any time after the
extraordinary circumstance has occurred. At proposed Sec.
412.154(d)(2)(ii), we propose that CMS notify the requestor with a
decision, in writing, via email. In the event that CMS grants an ECE to
the hospital, the written decision will specify whether the hospital is
exempted from one or more reporting requirements or whether CMS has
granted the hospital an extension of time to comply with one or more
reporting requirements.
---------------------------------------------------------------------------
\245\ CMS QualityNet. Available at: https://qualitynet.cms.gov/inpatient/hrrp/participation#tab2.
---------------------------------------------------------------------------
Additionally, at Sec. 412.154(d)(3), we propose that CMS may grant
an ECE to one or more hospitals that have not requested an ECE, if CMS
determines that: a systemic problem with CMS data collection system
directly impacted the ability of the hospital to comply with a quality
data reporting requirement; or that an extraordinary circumstance has
affected an entire region or locale. As is the case under our current
policy, any ECE granted will specify whether the affected hospitals are
exempted from one or more reporting requirements or whether CMS has
granted the hospitals an extension of time to comply with one or more
reporting requirements.
This proposed ECE policy would provide further reporting
flexibility for hospitals and clarify the ECE process for participants
of the Hospital Readmissions Reduction Program. We refer readers to
sections X.C.8, VI.L.5, VI.M.3.b, and X.D.4 in this proposed rule for
similar proposals in the Hospital IQR Program, Hospital VBP Program,
HAC Reduction Program, and PCHQR Program, respectively.
We invite public comment on our proposals.
L. Hospital Value-Based Purchasing (VBP) Program
1. Background
a. Overview
For background on the Hospital VBP Program, we refer readers to the
CMS website at: https://www.cms.gov/medicare/quality/initiatives/hospital-quality-initiative/hospital-value-based-purchasing. We also
refer readers to our codified requirements for the Hospital VBP Program
at 42 CFR 412.160 through 412.168.
b. FY 2026 Program Year Payment Details
Under section 1886(o)(7)(C)(v) of the Act, the applicable percent
for the FY 2026 program year is 2.00 percent. Using the methodology we
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through
53573), we estimate that the total amount available for value-based
incentive payments for FY 2026 is approximately $1.7 billion, based on
the December 2024 update of the FY 2024 MedPAR file.
As finalized in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53573
through 53576), we will utilize a linear exchange function to translate
this estimated amount available into a value-based incentive payment
percentage for each hospital, based on its Total Performance Score
(TPS). We are publishing proxy value-based incentive payment adjustment
factors in Table 16 associated with this proposed rule (which is
available via the internet on the CMS website). We note that these
proxy adjustment factors will not be used to adjust hospital payments.
These
[[Page 18290]]
proxy value-based incentive payment adjustment factors were calculated
using the proposed FY 2026 Hospital VBP program methodology and
historical baseline and performance periods for the FY 2025 Hospital
VBP Program and the SEP-1 measure. These proxy factors were calculated
using the December 2024 update to the FY 2024 MedPAR file. The slope of
the linear exchange function used to calculate these proxy factors was
4.5245231964, and the estimated amount available for value-based
incentive payments to hospitals for FY 2026 is approximately $1.7
billion. We intend to include an update to this table, as Table 16A,
with the FY 2026 IPPS/LTCH PPS final rule, to reflect changes based on
the March 2025 update to the FY 2024 MedPAR file. We will add Table 16B
to display the actual value-based incentive payment adjustment factors,
exchange function slope, and estimated amount available for the FY 2026
Hospital VBP Program. We expect that Table 16B will be posted on the
CMS website in Fall 2025.
2. Hospital VBP Program Measures
a. Proposed Measure Updates to the Hospital-Level Risk-Standardized
Complication Rate (RSCR) Following Elective Primary Total Hip
Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA)
(1) Background
We are proposing to adopt substantive measure updates to the
Hospital-level Risk-Standardized Complication Rate (RSCR) Following
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee
Arthroplasty (TKA) (hereinafter referred to as the COMP-HIP-KNEE
measure), beginning with the FY 2033 program year. We are proposing
these updates contingent on our adopting the same updates to the COMP-
HIP-KNEE measure for use in the Hospital IQR Program beginning with the
FY 2027 payment determination, which we discuss further in section X.C.
of the preamble of this proposed rule.
We adopted the COMP-HIP-KNEE measure in the FY 2015 IPPS/LTCH PPS
final rule beginning with the FY 2019 program year for use in the
Hospital VBP Program (79 FR 50062 through 50063). We previously adopted
substantive updates to the COMP-HIP-KNEE measure in the FY 2024 IPPS/
LTCH PPS final rule (88 FR 59067 through 59070) to include index
admission diagnoses and in-hospital comorbidity data from Medicare Part
A claims which expanded the measure outcome to include 26 additional
mechanical complications as identified from 10th revision of the
International Classification of Diseases (ICD-10) codes. We continue to
consider the clinical outcomes of the COMP-HIP-KNEE measure a high
priority, providing important data on patient safety and adverse
events, which is why we are proposing to adopt additional updates to
the COMP-HIP-KNEE measure in the Hospital VBP Program under the
Clinical Outcomes Domain beginning with the FY 2033 program year. In
Table VI.L.-01, we illustrate the program years for which we have
adopted the COMP-HIP-KNEE measure and the updates that we have adopted,
as well as the proposed updates.
Table VI.L.-01--Summary of Current and Proposed Reporting of the COMP-
HIP-KNEE Measure in the Hospital IQR and VBP Programs
------------------------------------------------------------------------
Version of measure in use
Payment year or program year -----------------------------------------
impacted Hospital VBP
Hospital IQR Program Program
------------------------------------------------------------------------
FY 2026....................... Modification 1 Original.\2\
(Additional outcomes
added) \1\.
FY 2027....................... Modification 2 (Add MA Original.
patients, shorten
performance period)
\3\.
FY 2028....................... Modification 2........ Original.
FY 2029....................... Modification 2........ Original.
FY 2030....................... N/A................... Modification 1.
FY 2031....................... N/A................... Modification 1.
FY 2032....................... N/A................... Modification 1.
FY 2033 and Subsequent Years.. N/A................... Modification 2.
------------------------------------------------------------------------
\1\ Modification 1 was finalized in the FY 2024 IPPS/LTCH PPS final
rule.
\2\ Original version of the measure was finalized in the FY 2015 IPPS/
LTCH PPS final rule.
\3\ Modification 2 is being proposed in this section of the proposed
rule.
(2) Overview of Measure Updates
The proposed substantive updates to the COMP-HIP-KNEE measure would
expand the measure's inclusion criteria to (1) include Medicare
Advantage (MA) patients and (2) shorten the performance period from 3
years to 2 years. The addition of MA data to the measure would
approximately double the cohort size, demonstrate measure reliability,
and more accurately reflect the quality of care for both FFS and MA
beneficiaries. Additionally, the proposed update to reduce the
performance period from 3 to 2 years would allow for more recent data
for assessing performance. Being able to report measures with only 2
years of data with satisfactory reliability would provide more relevant
and up to date quality information for actionable quality improvement
insights.
With the inclusion of MA patients in the cohort, we assessed
whether the reliability of the measure could reach a satisfactory level
when the performance period is shortened. Signal-to-noise reliability
testing was calculated for all hospitals in the testing sample
(n=3,124) and hospitals with at least 25 cases (n=1,777), using 2 years
of data for analysis (CY 2022/2023). For hospitals with at least 25
cases, the median reliability score was 0.784, ranging from 0.545 to
0.997. The 25th and 75th percentiles were 0.673 and 0.883,
respectively. Therefore 75% of hospitals exceed a 0.6 reliability
score, using the 2 year FFS and MA combined cohort, and we believe that
this reliability score demonstrates that 2 years of data provide
satisfactory reliability.
The proposed updated COMP-HIP-KNEE measure would use index
admission diagnoses and procedure codes from Medicare FFS claims and MA
encounter data to determine cohort inclusion criteria, complications
outcomes, and present on admission (POA) comorbidities. We would assess
additional comorbidities prior to the index (initial) admission using
Part A inpatient, outpatient, and Part B office visit Medicare claims
and MA encounters in the 12 months prior to index admission. We would
obtain enrollment status from the Medicare Enrollment Database which
contains beneficiary demographic, benefit/
[[Page 18291]]
coverage, and vital status information. We refer readers to section
X.C. of the preamble of this proposed rule for more information on the
proposed updates. As stated previously, these proposed updates in the
Hospital VBP Program are contingent on our adopting them in the
Hospital IQR Program.
(3) Pre-Rulemaking Process and Measure Endorsement
We listed this updated COMP-HIP-KNEE measure in the publicly
available document entitled ``List of Measures Under Consideration for
December 1, 2024'' (the ``MUC List'') with identification number
MUC2024-042.246 247 248 We refer readers to section X.C. of
the preamble of this proposed rule for a discussion of the Pre-
Rulemaking Measure Review (PRMR) meeting for this measure.
---------------------------------------------------------------------------
\246\ Centers for Medicare & Medicaid Services. (2024) Overview
of the List of Measures Under Consideration December 1, 2024.
Available at: https://mmshub.cms.gov/sites/default/files/2024-MUC-List-Overview.pdf.
\247\ Centers for Medicare and Medicaid Services. (2024) 2024
MUC List. Available at: https://mmshub.cms.gov/sites/default/files/2024-MUC-List.xlsx.
\248\ We note that the measure denominator of the updated COMP-
HIP-KNEE measure, as described in the MUC List, excludes patients
with a principal diagnosis code of COVID-19 ICD-10 code (U07.1) or
with a secondary diagnosis code of COVID-19 coded as present on
admission (POA) on the index admission claim. As discussed further
below, we are providing notice of our intent to remove this
exclusion from the measure.
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The CBE previously re-endorsed the original measure in July of
2021.\249\ We submitted the measure with the proposed modifications
(CBE #1550) for re-endorsement for the Fall 2024 cycle. The CBE's
Endorsement & Maintenance Cost and Efficiency Committee convened in the
Fall 2024 cycle to review the COMP-HIP-KNEE measure that was submitted
to the CBE for re-endorsement. The E&M Cost and Efficiency Committee
voted, and did not reach consensus on this measure on February 10,
2025.\250\ Thus, the measure was not re-endorsed by the CBE.
---------------------------------------------------------------------------
\249\ Centers for Medicare & Medicaid Services. (2022) MAP 2021-
2022 Considerations for Implementing Measures Final Report--
Clinicians, Hospitals, and PAC-LTC. Available at: https://www.qualityforum.org/Publications/2022/03/MAP_2021-2022_Considerations_for_Implementing_Measures_Final_Report_-_Clinicians,_Hospitals,_and_PAC-LTC.aspx.
\250\ Battelle--Partnership for Quality Measurement. (2025).
Fall 2024 Endorsement Summary Report. This report will be available
through this link: https://p4qm.org/projects/cost-and-efficiency.
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The committee discussed concerns about the case mix of patients,
noting the shift from inpatient to outpatient for these elective
procedures and that healthier patients may be directed to ambulatory
surgical centers, leaving acute care hospitals with higher-risk
individuals, which could affect case mix and measure outcomes. Another
concern discussed was the limited scope of the measure which only
includes inpatient complications, and whether this limited scope
provides utility and relevance for patients. Additional concerns
discussed include the overall approach to adjusting low-volume provider
performance to the average, and that scores for lower volume providers
may be misleading to patients.
Regarding concerns on patient mix, we note that this measure
focuses on higher-risk patients and is intentionally narrow to capture
significant complications, such as sepsis, pulmonary embolism, or a
second surgery which should be treated in the inpatient setting. We
wish to emphasize that those having elective THA or TKA procedures
within the inpatient setting must meet certain criteria, resulting in a
smaller cohort of patients, and in communities where there are no
ambulatory care centers the patient would be treated in the hospital
outpatient department and would not be counted in this measure.
Regarding comments about adjusting for low patient volume, the goal of
this measure and adjusting for low volume is to make performance scores
available for as many providers as possible while trying to avoid
misclassification or profiling of providers. We further note that
scores are not available for facilities with fewer than 25 cases,
because the number of cases may be too small for meaningful results. We
wish to emphasize that this measure has been an important patient
safety measure that has provided meaningful quality and patient safety
information for patients on the hospital inpatient setting for a
substantial period of time. Further, we are committed to continually
improving quality and patient safety for as many patients as possible
within the inpatient setting.
Section 1886(o)(2)(A) of the Act requires the Hospital VBP Program
to select measures that have been specified for the Hospital IQR
Program. We note that although section 1886(b)(3)(B)(viii)(IX)(aa) of
the Act generally requires measures specified by the Secretary in the
Hospital IQR Program be endorsed by the entity with a contract under
section 1890(a) of the Act, section 1886(b)(3)(B)(viii)(IX)(bb) of the
Act states that in the case of a specified area or medical topic
determined appropriate by the Secretary for which a feasible and
practical measure has not been endorsed by the entity with a contract
under section 1890(a) of the Act, the Secretary may specify a measure
that is not endorsed as long as due consideration is given to measures
that have been endorsed or adopted by a consensus organization
identified by the Secretary. We reviewed CBE-endorsed measures and were
unable to identify any other CBE-endorsed measures on this topic, and,
therefore, the exception in section 1886(b)(3)(B)(viii)(IX)(bb) of the
Act applies.
(4) Data Source, Submission and Public Reporting
To continue to assess clinical outcomes, we are proposing to adopt
these measure updates to the COMP-HIP-KNEE measure in the Hospital VBP
Program under the Clinical Outcomes Domain beginning with the FY 2033
program year, contingent on our adoption of these changes in the
Hospital IQR Program as described in section X.C. of the preamble of
this proposed rule. If finalized, we would begin posting the updated
measure data on the Compare tool beginning in July 2026, which would
enable us to post data on the substantive updates to the measure for at
least one year before the proposed adoption beginning with the April 1,
2029-March 31, 2031, performance period which is associated with the FY
2033 payment determination, as required by section 1886(o)(2)(C)(i) of
the Act.\251\ We are also proposing that the performance standards
calculation methodology for the updated COMP-HIP-KNEE measure would be
the same as that which we currently use for the measure. The
performance standards for the updated measure for FY 2033 are not yet
available.
---------------------------------------------------------------------------
\251\ We note that this performance period would only be 2 years
instead of 3 if the proposed updates to the COMP-HIP-KNEE measure,
which includes shortening of the performance period, are adopted.
---------------------------------------------------------------------------
We invite public comment on this proposal.
b. Technical Updates to the Specifications of the COMP-HIP-KNEE Measure
To Update the Risk Adjustment Model Beginning With the FY 2027 Program
Year
In addition to the updates discussed previously and further updates
we discuss below, we provide notice of our intent to make a non-
substantive modification, as permitted under Sec. 412.164(c)(1), to
the COMP-HIP-KNEE measure to update the risk adjustment model to use
individual International Classification of Diseases (ICD)-10 codes
instead of Hierarchical Condition Categories (HCCs). Under this
technical updates policy, we use a
[[Page 18292]]
subregulatory process to incorporate technical measure specification
updates into the measure specifications we have adopted for the
Hospital VBP Program (79 FR 50077 through 50079). We continue to
believe that this policy, codified at 42 CFR 412.164(c)(1), is the most
expeditious manner possible to ensure that quality measures remain
fully up to date while preserving the public's ability to comment on
substantive updates, which so fundamentally change a measure that it is
no longer the same measure that we originally adopted. The current risk
adjustment strategy for this measure involves grouping ICD-10 diagnosis
codes from CMS's HCC system into clinically relevant categories. We
then evaluate the HCCs for statistical association with the measure's
outcome.\252\ However, research has indicated that using individual ICD
codes in place of HCCs could significantly improve the model
performance of the mortality measures.\253\ To better leverage the data
and analytical advances since the measure was initially developed, we
created a new approach to use individual ICD-10 codes for risk
adjustment instead of grouping them into categories. With this new
approach, the discriminative performance of the risk adjustment model
as measured by c-statistic was significantly better and the calibration
performance also proved to be satisfactory.
---------------------------------------------------------------------------
\252\ Centers for Medicare & Medicaid Services. 2024 Condition-
Specific Measure Updates and Specifications Report. Available at:
https://qualitynet.cms.gov/inpatient/measures/mortality/methodology.
\253\ Krumholz, H.M., Coppi, A.C., Warner, F., Triche, E.W., Li,
S.X., Mahajan, S., Li, Y., Bernheim, S.M., Grady, J., Dorsey, K.,
Lin, Z., & Normand, S.T. (2019). Comparative Effectiveness of New
Approaches to Improve Mortality Risk Models From Medicare Claims
Data. JAMA network open, 2(7), e197314. https://doi.org/10.1001/jamanetworkopen.2019.7314.
---------------------------------------------------------------------------
c. Technical Updates to the Specifications of the Five Condition- and
Procedure-Specific Mortality Measures and the COMP-HIP-KNEE Measure
Beginning With the FY 2027 Program Year
During the COVID-19 public health emergency, in the FY 2022 IPPS/
LTCH PPS final rule, we stated that we were updating the Hospital 30-
Day, All-Cause, Risk-Standardized Mortality Rate Following Acute
Myocardial Infarction (AMI) Hospitalization (MORT-30-AMI), Hospital 30-
Day, All-Cause, Risk-Standardized Mortality Rate Following Coronary
Artery Bypass Graft (CABG) Surgery (MORT-30-CABG), Hospital 30-Day,
All-Cause, Risk-Standardized Mortality Rate Following Chronic
Obstructive Pulmonary Disease (COPD) Hospitalization (MORT-30 COPD),
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following
Heart Failure (HF) Hospitalization (MORT-30-HF), and Hospital-Level
Risk-Standardized Complication Rate Following Elective Primary Total
Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (COMP-HIP-
KNEE) measures to exclude admissions with either a principal or
secondary diagnosis of COVID-19 present on admission from the measure
denominators (86 FR 45279 through 45281). In the FY 2023 IPPS/LTCH PPS
final rule, we also updated the technical specifications for the
Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate Following
Pneumonia Hospitalization (MORT-30-PN) measure to exclude patients with
either principal or secondary diagnoses of COVID-19 from the measure
denominator (87 FR 49109 through 49110). Additionally, we further
modified the technical measure specifications for all six measures in
the Clinical Outcomes domain, the MORT-30-AMI, MORT-30-CABG, MORT-30-
COPD, MORT-30-HF, MORT-30-PN, and COMP-HIP-KNEE measures, in the FY
2023 IPPS/LTCH PPS final rule to include a covariate adjustment for
patient history of COVID-19 in the 12 months prior to the admission
beginning with the FY 2023 program year (87 FR 49106 through 49109).
We stated that we were making these updates pursuant to the
technical updates policy we finalized in the FY 2015 IPPS/LTCH PPS
final rule. We refer readers to the previous section of the preamble of
this proposed rule for more details on our subregulatory technical
updates policy.
Accordingly, we are providing notice in this proposed rule that we
intend to remove the COVID-19 exclusions from the five condition- and
procedure-specific mortality measures and one procedure-specific
complication measure beginning with the FY 2027 program year. This
technical update will modify the technical specifications of the MORT-
30-AMI, MORT-30-CABG, MORT-30-COPD, MORT-30-HF, and MORT-30-PN measures
to include the ICD-10 codes that identify patients with a principal or
secondary diagnosis of COVID-19 in the measure denominators. The
technical update will also modify the technical specifications of the
COMP-HIP-KNEE measure to include the ICD-10 codes that identify
patients with a principal or secondary diagnosis of COVID-19 in both
the measure numerator and denominator. Lastly, the technical update
will remove the covariate adjustment for patient history of COVID-19 in
the 12 months prior to the admission for all six measures in the
Clinical Outcomes domain for the Hospital VBP Program beginning with
the FY 2027 program year.
We believe that including COVID-19 patients in the measure
specifications for the measures in the Clinical Outcomes domain
beginning with the FY 2027 program year provides a more complete
picture of the care quality provided in hospitals, which we believe
meets the goals of the Hospital VBP Program. Technical specifications
of the Hospital VBP Program mortality and complication measures are
provided on our website under the Measure Methodology Reports section
(available at: https://qualitynet.cms.gov/inpatient/measures/mortality/methodology and https://qualitynet.cms.gov/inpatient/measures/complication/methodology). Additional resources about the measure
technical specifications and methodology for the Hospital VBP Program
are on the QualityNet website (available at: https://qualitynet.cms.gov/inpatient/hvbp).
d. Summary of Previously Adopted Quality Measures for the Hospital VBP
Program
We refer readers to the FY 2025 IPPS/LTCH PPS final rule for
summaries of the previously adopted measures for the FY 2026 through FY
2030 program years (89 FR 69402). We are not proposing any changes to
the measure set. Table VI.L.-02 summarizes the previously adopted
Hospital VBP Program measure set for the FY 2026 program year.
[[Page 18293]]
Table VI.L.-02--Summary of Previously Adopted Measures for the FY 2026
Program Year
------------------------------------------------------------------------
Measure short name Domain/measure name CBE No.
------------------------------------------------------------------------
Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS......................... Hospital Consumer 0166 (0228)
Assessment of
Healthcare Providers
and Systems (HCAHPS)
(including Care
Transition and
Responsiveness of
Hospital Staff
dimensions).
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
CAUTI.......................... National Healthcare 0138
Safety Network (NHSN)
Catheter Associated
Urinary Tract
Infection (CAUTI)
Outcome Measure.
CLABSI......................... National Healthcare 0139
Safety Network (NHSN)
Central Line
Associated Bloodstream
Infection (CLABSI)
Outcome Measure.
Colon and Abdominal American College of 0753
Hysterectomy SSI. Surgeons Centers for
Disease Control and
Prevention (ACS-CDC)
Harmonized Procedure
Specific Surgical Site
Infection (SSI)
Outcome Measure.
MRSA Bacteremia................ National Healthcare 1716
Safety Network (NHSN)
Facility wide
Inpatient Hospital
onset Methicillin-
resistant
Staphylococcus aureus
(MRSA) Bacteremia
Outcome Measure.
CDI............................ National Healthcare 1717
Safety Network (NHSN)
Facility wide
Inpatient Hospital
onset Clostridium
difficile Infection
(CDI) Outcome Measure.
SEP-1.......................... Severe Sepsis and 0500
Septic Shock:
Management Bundle.
------------------------------------------------------------------------
Clinical Outcomes Domain
------------------------------------------------------------------------
MORT-30-AMI.................... Hospital 30-Day, All- 0230
Cause, Risk-
Standardized Mortality
Rate Following Acute
Myocardial Infarction
(AMI) Hospitalization.
MORT-30-HF..................... Hospital 30-Day, All- 0229
Cause, Risk-
Standardized Mortality
Rate Following Heart
Failure (HF)
Hospitalization.
MORT-30-PN..................... Hospital 30-Day, All- 0468
Cause, Risk-
Standardized Mortality
Rate Following
Pneumonia
Hospitalization.
MORT-30-COPD................... Hospital 30-Day, All- 1893
Cause, Risk-
Standardized Mortality
Rate Following Chronic
Obstructive Pulmonary
Disease (COPD)
Hospitalization.
MORT-30-CABG................... Hospital 30-Day, All- 2558
Cause, Risk-
Standardized Mortality
Rate Following
Coronary Artery Bypass
Graft (CABG) Surgery.
COMP-HIP-KNEE.................. Hospital Level Risk- 1550
Standardized
Complication Rate
Following Elective
Primary Total Hip
Arthroplasty (THA) and/
or Total Knee
Arthroplasty (TKA).
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB........................... Medicare Spending Per 2158
Beneficiary (MSPB)
Hospital.
------------------------------------------------------------------------
Table VI.L.-03 summarizes the previously adopted Hospital VBP
Program measures for the FY 2027 through FY 2031 program years.
Table VI.L.-03--Summary of Previously Adopted Measures for the FY 2027
Through FY 2031 Program Years
------------------------------------------------------------------------
Measure short name Domain/measure name CBE No.
------------------------------------------------------------------------
Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS *....................... Hospital Consumer 0166 (0228)
Assessment of
Healthcare Providers
and Systems (HCAHPS)
(including Care
Transition and
Responsiveness of
Hospital Staff
dimensions).
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
CAUTI.......................... National Healthcare 0138
Safety Network (NHSN)
Catheter Associated
Urinary Tract
Infection (CAUTI)
Outcome Measure.
CLABSI......................... National Healthcare 0139
Safety Network (NHSN)
Central Line
Associated Bloodstream
Infection (CLABSI)
Outcome Measure.
Colon and Abdominal American College of 0753
Hysterectomy SSI. Surgeons Centers for
Disease Control and
Prevention (ACS-CDC)
Harmonized Procedure
Specific Surgical Site
Infection (SSI)
Outcome Measure.
MRSA Bacteremia................ National Healthcare 1716
Safety Network (NHSN)
Facility wide
Inpatient Hospital
onset Methicillin-
resistant
Staphylococcus aureus
(MRSA) Bacteremia
Outcome Measure.
CDI............................ National Healthcare 1717
Safety Network (NHSN)
Facility wide
Inpatient Hospital
onset Clostridium
difficile Infection
(CDI) Outcome Measure.
SEP-1.......................... Severe Sepsis and 0500
Septic Shock:
Management Bundle.
------------------------------------------------------------------------
[[Page 18294]]
Clinical Outcomes Domain
------------------------------------------------------------------------
MORT-30-AMI.................... Hospital 30-Day, All- 0230
Cause, Risk-
Standardized Mortality
Rate Following Acute
Myocardial Infarction
(AMI) Hospitalization.
MORT-30-HF..................... Hospital 30-Day, All- 0229
Cause, Risk-
Standardized Mortality
Rate Following Heart
Failure (HF)
Hospitalization.
MORT-30-PN..................... Hospital 30-Day, All- 0468
Cause, Risk-
Standardized Mortality
Rate Following
Pneumonia
Hospitalization.
MORT-30-COPD................... Hospital 30-Day, All- 1893
Cause, Risk-
Standardized Mortality
Rate Following Chronic
Obstructive Pulmonary
Disease (COPD)
Hospitalization.
MORT-30-CABG................... Hospital 30-Day, All- 2558
Cause, Risk-
Standardized Mortality
Rate Following
Coronary Artery Bypass
Graft (CABG) Surgery.
COMP-HIP-KNEE.................. Hospital Level Risk- 1550
Standardized
Complication Rate
Following Elective
Primary Total Hip
Arthroplasty (THA) and/
or Total Knee
Arthroplasty (TKA).
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB........................... Medicare Spending Per 2158
Beneficiary (MSPB)
Hospital.
------------------------------------------------------------------------
* In the FY 2025 IPPS/LTCH PPS final rule, we adopted the updated HCAHPS
Survey measure in the Hospital VBP Program beginning with the FY 2030
program (89 FR 69508 through 69511). The Care Transition and
Responsiveness of Hospital Staff dimensions will be included in the
HCAHPS survey but not scored for FY 2027 through FY 2029, and will not
be included in the HCAHPS survey beginning with FY 2030.
3. Baseline and Performance Periods for the FY 2027 Through FY 2031
Program Years
a. Background
We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR
69403 through 69405) for previously adopted baseline and performance
periods for the FY 2026 through FY 2030 program years. We also refer
readers to the FY 2017 IPPS/LTCH PPS final rule (81 FR 56998) in which
we finalized a schedule for all future baseline and performance
periods.
b. Summary of Baseline and Performance Periods for the FY 2027 Through
FY 2031 Program Years
Tables VI.L.-04, VI.L.-05, VI.L.-06, VI.L.-07, and VI.L.-08
summarize the baseline and performance periods that we have previously
adopted.
Table VI.L.-04--Baseline and Performance Periods for the FY 2027 Program
Year
------------------------------------------------------------------------
Measures Baseline period Performance period
------------------------------------------------------------------------
Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.......................... January 1, 2023- January 1, 2025-
December 31, 2023. December 31,
2025.
------------------------------------------------------------------------
Clinical Outcomes Domain
------------------------------------------------------------------------
Mortality measures (MORT-30-AMI, July 1, 2017-June July 1, 2022-June
MORT-30-HF, MORT-30-COPD, MORT- 30, 2020 *. 30, 2025.
30-CABG, MORT-30-PN).
COMP-HIP-KNEE................... April 1, 2017- April 1, 2022-
March 31, 2020 *. March 31, 2025.
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
NHSN measures (CAUTI, CLABSI, January 1, 2023- January 1, 2025-
Colon and Abdominal December 31, 2023. December 31,
Hysterectomy SSI, CDI, MRSA 2025.
Bacteremia).
SEP-1........................... January 1, 2023- January 1, 2025-
December 31, 2023. December 31,
2025.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB............................ January 1, 2023- January 1, 2025-
December 31, 2023. December 31,
2025.
------------------------------------------------------------------------
* These baseline periods are impacted by the extraordinary circumstance
exception (ECE) granted by CMS on March 22, 2020, due to the COVID-19
public health emergency. Qualifying claims will be excluded from the
measure calculations for January 1, 2020-March 31, 2020 (Q1 2020), and
April 1, 2020-June 30, 2020 (Q2 2020), from the claims-based
complication and mortality measures. For more detailed information, we
refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297
through 45299).
Table VI.L.-05--Baseline and Performance Periods for the FY 2028 Program
Year
------------------------------------------------------------------------
Measures Baseline period Performance period
------------------------------------------------------------------------
Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.......................... January 1, 2024- January 1, 2026-
December 31, 2024. December 31,
2026.
------------------------------------------------------------------------
[[Page 18295]]
Clinical Outcomes Domain
------------------------------------------------------------------------
Mortality measures (MORT-30-AMI, July 1, 2018-June July 1, 2023-June
MORT-30-HF, MORT3-0-COPD, MORT- 30, 2021 *. 30, 2026.
30-CABG, MORT-30-PN).
COMP-HIP-KNEE................... April 1, 2018- April 1, 2023-
March 31, 2021 *. March 31, 2026.
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
NHSN measures (CAUTI, CLABSI, January 1, 2024- January 1, 2026-
Colon and Abdominal December 31, 2024. December 31,
Hysterectomy SSI, CDI, MRSA 2026.
Bacteremia).
SEP-1........................... January 1, 2024- January 1, 2026-
December 31, 2024. December 31,
2026.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB............................ January 1, 2024- January 1, 2026-
December 31, 2024. December 31,
2026.
------------------------------------------------------------------------
* These baseline periods are impacted by the ECE granted by CMS on March
22, 2020. Qualifying claims will be excluded from the measure
calculations for January 1, 2020-March 31, 2020 (Q1 2020), and April
1, 2020-June 30, 2020 (Q2 2020), from the claims-based complication
and mortality measures. For more detailed information, we refer
readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297 through
45299).
Table VI.L.-06--Baseline and Performance Periods for the FY 2029 Program
Year
------------------------------------------------------------------------
Measures Baseline period Performance period
------------------------------------------------------------------------
Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.......................... January 1, 2025- January 1, 2027-
December 31, 2025. December 31,
2027.
------------------------------------------------------------------------
Clinical Outcomes Domain
------------------------------------------------------------------------
Mortality measures (MOR-T30-AMI, July 1, 2019-June July 1, 2024-June
MORT-30-HF, MORT-30-COPD, MORT- 30, 2022 *. 30, 2027.
30-CABG, MORT-30-PN).
COMP-HIP-KNEE................... April 1, 2019- April 1, 2024-
March 31, 2022 *. March 31, 2027.
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
NHSN measures (CAUTI, CLABSI, January 1, 2025- January 1, 2027-
Colon and Abdominal December 31, 2025. December 31,
Hysterectomy SSI, CDI, MRSA 2027.
Bacteremia).
SEP-1........................... January 1, 2025- January 1, 2027-
December 31, 2025. December 31,
2027.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB............................ January 1, 2025- January 1, 2027-
December 31, 2025. December 31,
2027.
------------------------------------------------------------------------
* These baseline periods are impacted by the ECE granted by CMS on March
22, 2020. Qualifying claims will be excluded from the measure
calculations for January 1, 2020-March 31, 2020 (Q1 2020), and April
1, 2020-June 30, 2020 (Q2 2020), from the claims-based complication
and mortality measures. For more detailed information, we refer
readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297 through
45299).
Table VI.L.-07--Baseline and Performance Periods for the FY 2030 Program
Year
------------------------------------------------------------------------
Measures Baseline period Performance period
------------------------------------------------------------------------
Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.......................... January 1, 2026- January 1, 2028-
December 31, 2026. December 31,
2028.
------------------------------------------------------------------------
Clinical Outcomes Domain
------------------------------------------------------------------------
Mortality measures (MORT-30-AMI, July 1, 2020-June July 1, 2025-June
MORT-30-HF, MORT3-0-COPD, MORT- 30, 2023. 30, 2028.
30-CABG, MORT-30-PN).
COMP-HIP-KNEE................... April 1, 2020- April 1, 2025-
March 31, 2023 *. March 31, 2028.
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
NHSN measures (CAUTI, CLABSI, January 1, 2026- January 1, 2028-
Colon and Abdominal December 31, 2026. December 31,
Hysterectomy SSI, CDI, MRSA 2028.
Bacteremia).
SEP-1........................... January 1, 2026- January 1, 2028-
December 31, 2026. December 31,
2028.
------------------------------------------------------------------------
[[Page 18296]]
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB............................ January 1, 2026- January 1, 2028-
December 31, 2026. December 31,
2028.
------------------------------------------------------------------------
* This baseline period is impacted by the ECE granted by CMS on March
22, 2020. Qualifying claims will be excluded from the measure
calculation for January 1, 2020-March 31, 2020 (Q1 2020), and April 1,
2020-June 30, 2020 (Q2 2020), from the claims-based complication
measure. For more detailed information, we refer readers to the FY
2022 IPPS/LTCH PPS final rule (86 FR 45297 through 45299).
Table VI.L.-08--Baseline and Performance Periods for the FY 2031 Program
Year
------------------------------------------------------------------------
Measures Baseline period Performance period
------------------------------------------------------------------------
Person and Community Engagement Domain
------------------------------------------------------------------------
HCAHPS.......................... January 1, 2027- January 1, 2029-
December 31, 2027. December 31,
2029.
------------------------------------------------------------------------
Clinical Outcomes Domain
------------------------------------------------------------------------
Mortality measures (MORT-30-AMI, July 1, 2021-June July 1, 2026-June
MORT-30-HF, MORT3-0-COPD, MORT- 30, 2024. 30, 2029.
30-CABG, MORT-30-PN).
COMP-HIP-KNEE................... April 1, 2021- April 1, 2026-
March 31, 2024. March 31, 2029.
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
NHSN measures (CAUTI, CLABSI, January 1, 2027- January 1, 2029-
Colon and Abdominal December 31, 2027. December 31,
Hysterectomy SSI, CDI, MRSA 2029.
Bacteremia).
SEP-1........................... January 1, 2027- January 1, 2029-
December 31, 2027. December 31,
2029.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB............................ January 1, 2027- January 1, 2029-
December 31, 2027. December 31,
2029.
------------------------------------------------------------------------
4. Performance Standards for the Hospital VBP Program
a. Background
We refer readers to the FY 2024 IPPS/LTCH PPS final rule (88 FR
59089) for previously established performance standards for the FY 2026
program year. We also refer readers to the FY 2025 IPPS/LTCH PPS final
rule (89 FR 69406 through 69407) for the previously established
performance standards for the FY 2027 program year.
b. Technical Update to the Five National Healthcare Safety Network
(NHSN) Healthcare-Associated Infection (HAI) Measures
In this section, we provide information regarding upcoming changes
to the standard population data that are used to calculate the
standardized infection ratio (SIR) for the CDC's NHSN measures. These
changes are occurring as part of routine measure maintenance.
CDC's NHSN measures are used to monitor hospital performance on
prevention of HAIs. For each NHSN measure, CDC calculates the
standardized infection ratio (SIR), which compares a hospital's
observed number of HAIs to the number of infections predicted for the
hospital, adjusting for several risk factors. The predicted number of
infections is determined using the amount of exposure (for example, the
number of central line days when predicting CLABSI events) for a given
hospital according to the relevant observed risk factors and infection
rates for the same combination of risk factors that occurred among a
standard population during a specified period as reflected by the
appropriate risk adjustment model (this is sometimes referred to as a
``baseline,'' \254\ but referred to here as ``standard population
data''). This set of rates forms standard population data that promotes
timely comparisons to measure change in an outcome. Since 2016, CDC has
been using data collected in CY 2015 to determine the standard
population and, currently, the 2015 standard population is used to
calculate the HAI measures in the Hospital VBP Program.\255\ Prior to
2016, calculated SIRs had different standard population years for each
infection type and facility type.\256\
---------------------------------------------------------------------------
\254\ ``Rebaseline'' is a term that CDC's NHSN staff use to
describe the process of updating the national HAI baseline data and
risk adjustment models developed using these data. As part of
routine measure maintenance, CDC has updated the baseline to ensure
the number of predicted infections used in SIR calculations reflects
the current state of HAIs in the United States using CY 2022 data.
The CDC released its initial announcement of this rebaseline in June
2023. Resources and training regarding the 2015 and 2022 standard
population data can be found at: https://www.cdc.gov/nhsn/nhsnrebaseline/index.html.
\255\ Centers for Disease Control and Prevention. CHARTING THE
COURSE: 2022 HAI REBASELINE. Available at: https://www.cdc.gov/nhsn/pdfs/rebaseline/22-Rebaseline-FAQs-Final-Version.pdf.
\256\ Centers for Disease Control and Prevention. Paving the
Path Forward: 2015 Rebaseline. Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html.
---------------------------------------------------------------------------
During this update, HAI SIR calculations of infections reported
beginning in CY 2025 will reflect the use of both the new 2022 standard
population data and the 2015 standard population data.
Because the Hospital VBP Program calculates improvement points
using comparisons between data collected from hospitals in a baseline
period and data collected in a performance period, the Hospital VBP
Program must treat CDC's baseline update differently than other quality
programs. We have determined that we cannot equally compare CDC's new
baseline data to the current baseline data to calculate improvement
points. If we do not address the CDC's measure update, we will be
unable to compare the baseline and performance periods for NHSN
measures in the FY 2027 through FY 2028 program years. To address the
[[Page 18297]]
problem, we intend to use the 2015 baseline data to calculate
performance standards and calculate and publicly report measure scores
until the FY 2029 program year, as depicted in the table below. For the
FY 2029 program year and subsequent years, the Hospital VBP Program
will use the ``new standard population data'' (that is, CY 2022 data)
to calculate performance standards and calculate and publicly report
measure scores.
Table VI.L.-09--CDC's Baseline Data in the Hospital VBP Program
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Measures FY 2026 Program year * FY 2027 Program year * FY 2028 Program year * FY 2029 Program year *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
NHSN Measures Baseline Periods...... 2015 Baseline Data................... 2015 Baseline Data................... 2015 Baseline Data................... 2022 Baseline Data.
NHSN Measures Performance Period.... 2015 Baseline Data................... 2015 Baseline Data................... 2015 Baseline Data................... 2022 Baseline Data.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* CDC will use current baseline data (CY 2015) to calculate measure data that we will translate into scores on the measures.
** CDC will use new baseline data (CY 2022) to calculate measure data that we will translate into scores on the measures.
c. Previously and Newly Established Performance Standards for the FY
2027 Program Year
We have adopted certain measures for the Safety domain, Clinical
Outcomes domain, and the Efficiency and Cost Reduction domain for
future program years to ensure that we can adopt baseline and
performance periods of sufficient length for performance scoring
purposes. In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45294 through
45295), we established performance standards for the FY 2027 program
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN (updated cohort), MORT-30-COPD, MORT-30-CABG, and COMP-
HIP-KNEE) and the Efficiency and Cost Reduction domain measure (MSPB).
Additionally, in the FY 2025 IPPS/LTCH PPS final rule, we established
the performance standards for the FY 2027 program year for the Safety
domain measures (CAUTI, CLABSI, CDI, MRSA Bacteremia, Colon and
Abdominal Hysterectomy SSI, and SEP-1) and the Person and Community
Engagement Domain (the HCAHPS Survey Dimensions) (89 FR 69406 through
69407).
While we are making technical updates to the measures in the
Clinical Outcomes domain beginning with the FY 2027 program year as
discussed previously, the FY 2027 performance standards that we
previously adopted for measures in this domain are unchanged because
the applicable baseline period does not include COVID-19 impacted data
after applying the national ECE. For the reader's reference, the
performance standards for the measures in the Clinical Outcomes domain
for the FY 2027 program year are set out in Table VI.L.-10.
Table VI.L.-10--Performance Standards For The FY 2027 Program Year
------------------------------------------------------------------------
Achievement
Measure short name threshold Benchmark
------------------------------------------------------------------------
Clinical Outcomes Domain *
------------------------------------------------------------------------
MORT-30-AMI............................. 0.877824 0.893133
MORT-30-HF.............................. 0.887571 0.913388
MORT-30-PN.............................. 0.844826 0.877204
MORT-30-COPD............................ 0.917395 0.932640
MORT-30-CABG............................ 0.971149 0.980752
COMP-HIP-KNEE **........................ 0.023322 0.017018
------------------------------------------------------------------------
* As discussed in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45297
through 45299), we did not include data from Q1 and Q2 of CY 2020 in
the calculation of these performance standards due to the ECE granted
by CMS on March 22, 2020.
** Lower values represent better performance.
d. Newly Established and Estimated Performance Standards for the FY
2028 Program Year
We have adopted certain measures for the Safety domain, Clinical
Outcomes domain, and the Efficiency and Cost Reduction domain for
future program years to ensure that we can adopt baseline and
performance periods of sufficient length for performance scoring
purposes. In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49118), we
established performance standards for the FY 2028 program year for the
Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-HF, MORT-30-PN,
MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the Efficiency and
Cost Reduction domain measure (MSPB Hospital). However, given the
technical update to the measures in the Clinical Outcomes domain
beginning with the FY 2027 program year as discussed previously, we are
establishing new performance standards for the measures in the Clinical
Outcomes domain for the FY 2028 program year. We note that the
performance standards for the MSPB Hospital measure are based on
performance period data. Therefore, we are unable to provide numerical
equivalents for the standards at this time. The newly established
performance standards for these measures are set out in Table VI.L.-11.
[[Page 18298]]
Table VI.L.-11.--Newly Established and Estimated Performance Standards
For The FY 2028 Program Year
------------------------------------------------------------------------
Achievement
Measure short name threshold Benchmark
------------------------------------------------------------------------
Safety Domain
------------------------------------------------------------------------
CAUTI * **...................... 0.463............. 0.
CLABSI * **..................... 0.549............. 0.
CDI * **........................ 0.329............. 0.
MRSA Bacteremia * **............ 0.618............. 0.
Colon and Abdominal Hysterectomy 0.74.............. 0.
SSI * **. 0.899.............
SEP-1 ***....................... 0.632479.......... 0.865693.
------------------------------------------------------------------------
Clinical Outcomes Domain
------------------------------------------------------------------------
MORT-30-AMI [diams]............. 0.877260.......... 0.893229.
MORT-30-HF [diams].............. 0.885427.......... 0.910649.
MORT-30-PN [diams].............. 0.831776.......... 0.866166.
MORT-30-COPD [diams]............ 0.913752.......... 0.929652.
MORT-30-CABG [diams]............ 0.971052.......... 0.980570.
COMP-HIP-KNEE * [diams]......... 0.029758.......... 0.022002.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB *.......................... Median Medicare Mean of the lowest
Spending per decile Medicare
Beneficiary ratio Spending per
across all Beneficiary
hospitals during ratios across all
the performance hospitals during
period. the performance
period.
------------------------------------------------------------------------
* Lower values represent better performance.
** We note that the numerical values for the performance standards for
the HAI measures in this proposed rule represent estimates based on
the most recently available data and have been rebaselined as
discussed previously. We intend to update the numerical values in the
FY 2026 IPPS/LTCH PPS final rule. These estimates are based on 10/01/
2023-09/30/2024 data.
*** We note that the numerical values for the performance standards for
the SEP-1 measure in this proposed rule represent estimates based on
the most recently available data. These estimates are based on 10/01/
2023-09/30/2024 data.
[diams] As discussed in section VI.L.2.a. and b. of the preamble of this
proposed rule, we are providing notice of a technical update for all
measures in the Clinical Outcomes Domain. While these performance
standards are unchanged at this time, we intend to update them in the
FY 2026 IPPS/LTCH PPS final rule.
We refer readers to the FY 2025 IPPS/LTCH PPS final rule (89 FR
69507-69508) where we finalized the policy to modify the scoring of the
HCAHPS Survey for the FY 2027 through FY 2029 program years while
updates to the survey are publicly reported under the Hospital IQR
Program. Scoring is modified to only score hospitals on the six
unchanged Hospital VBP dimensions of the HCAHPS Survey until the
updates to the HCAHPS Survey have been publicly reported for one year.
The six unchanged dimensions of the HCAHPS Survey for the Hospital VBP
Program are as follows:
``Communication with Nurses''.
``Communication with Doctors''.
``Communication about Medicines''.
``Discharge Information''.
``Cleanliness and Quietness''.
``Overall Rating.''
Scoring is modified such that for each of the six unchanged
dimensions, Achievement Points (0-10 points) and Improvement Points (0-
9 points) will be calculated, the larger of which will be summed across
these six dimensions to create a pre-normalized HCAHPS Base Score of 0-
60 points (as compared to 0-80 points with the current eight
dimensions). The pre-normalized HCAHPS Base Score will then be
multiplied by \8/6\ (1.3333333) and rounded according to standard rules
(values of 0.5 and higher are rounded up, values below 0.5 are rounded
down) to create the normalized HCAHPS Base Score. Each of the six
unchanged dimensions will be of equal weight, so that, as currently
scored, the normalized HCAHPS Base Score will range from 0 to 80
points. HCAHPS Consistency Points will be calculated in the same manner
as the current method and will continue to range from 0 to 20 points.
Like the Base Score, the Consistency Points Score will consider scores
across the six unchanged dimensions of the Person and Community
Engagement domain. The final element of the scoring formula, which will
remain unchanged from the current formula, will be the sum of the
HCAHPS Base Score and the HCAHPS Consistency Points Score for a total
score that ranges from 0 to 100 points. The method for calculating the
performance standards for the six dimensions will remain unchanged. We
refer readers to the Hospital Inpatient VBP Program final rule (76 FR
26511 through 26512) for our methodology for calculating performance
standards. The estimated performance standards for the six unchanged
dimensions for the FY 2028 program year are set out in Table VI.L.-12.
Table VI.L.-12--Estimated Performance Standards for the FY 2028 Program Year: Person and Community Engagement
Domain
----------------------------------------------------------------------------------------------------------------
Achievement
HCAHPS survey dimension * Floor threshold (50th Benchmark (mean of
(minimum) percentile) top decile)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses............................. 55.55 77.55 86.47
Communication with Doctors............................ 55.53 77.66 86.34
Responsiveness of Hospital Staff **................... X X X
[[Page 18299]]
Communication about Medicines......................... 38.47 58.25 69.90
Hospital Cleanliness & Quietness...................... 40.97 63.69 77.70
Discharge Information................................. 66.89 86.22 91.47
Care Transition **.................................... X X X
Overall Rating of Hospital............................ 35.06 69.07 84.04
----------------------------------------------------------------------------------------------------------------
* We note that the numerical values for the performance standards for the HCAHPS Survey in this proposed rule
represent estimates based on the most recently available data, and we intend to update the numerical values in
the FY 2026 IPPS/LTCH PPS final rule. These estimates are based on 10/01/2023-09/30/2024 data.
** In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69507 and 69508), we finalized the policy to only score on the
six unchanged dimensions of the original HCAHPS Survey for the FY 2028 program year while the updates to the
survey are publicly reported on in the Hospital IQR Program for the statutorily required one year. Therefore,
we are not reporting performance standards for the dimensions that are unscored.
e. Newly Established Performance Standards for Certain Measures for the
FY 2029 Program Year
We have adopted certain measures for the Safety domain, Clinical
Outcomes domain, and the Efficiency and Cost Reduction domain for
future program years to ensure that we can adopt baseline and
performance periods of sufficient length for performance scoring
purposes. In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59091 through
59092), we established performance standards for the FY 2029 program
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN, MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the
Efficiency and Cost Reduction domain measure (MSPB Hospital). However,
given the technical update to the measures in the Clinical Outcomes
domain beginning with the FY 2027 program year as discussed previously,
we are newly establishing the performance standards for the measures in
the Clinical Outcomes domain for the FY 2029 program year to now
include COVID-19 patients in the measure data. We note that the
performance standards for the MSPB Hospital measure are based on
performance period data. Therefore, we are unable to provide numerical
equivalents for the standards at this time. The newly established
performance standards for these measures are set out in Table VI.L-13.
Table VI.L.13--Newly Established Performance Standards for the FY 2029
Program Year
------------------------------------------------------------------------
Achievement
Measure short name threshold Benchmark
------------------------------------------------------------------------
Clinical Outcomes Domain*
------------------------------------------------------------------------
MORT-30-AMI..................... 0.874856.......... 0.893101.
MORT-30-HF...................... 0.880089.......... 0.9072.
MORT-30-PN...................... 0.814736.......... 0.853996.
MORT-30-COPD.................... 0.905916.......... 0.924829.
MORT-30-CABG.................... 0.971027.......... 0.979822.
COMP-HIP-KNEE **................ 0.025024.......... 0.018708.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB **......................... Median Medicare Mean of the lowest
Spending per decile Medicare
Beneficiary ratio Spending per
across all Beneficiary
hospitals during ratios across all
the performance hospitals during
period. the performance
period.
------------------------------------------------------------------------
* As discussed in section VI.L.2.a. and b. of the preamble of this
proposed rule, we are providing notice of a technical update for all
measures in the Clinical Outcomes Domain. While these performance
standards are unchanged at this time, we intend to update them in the
FY 2026 IPPS/LTCH PPS final rule.
** Lower values represent better performance.
f. Newly Established Performance Standards for Certain Measures for the
FY 2030 Program Year
We have adopted certain measures for the Safety domain, Clinical
Outcomes domain, and the Efficiency and Cost Reduction domain for
future program years to ensure that we can adopt baseline and
performance periods of sufficient length for performance scoring
purposes. In the FY 2025 IPPS/LTCH PPS final rule (89 FR 69409 through
69410), we established performance standards for the FY 2030 program
year for the Clinical Outcomes domain measures (MORT-30-AMI, MORT-30-
HF, MORT-30-PN, MORT-30-COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the
Efficiency and Cost Reduction domain measure (MSPB Hospital). However,
given the technical update to the measures in the Clinical Outcomes
domain beginning with the FY 2027 program year as discussed previously,
we are newly establishing the performance standards for the measures in
the Clinical Outcomes domain for the FY 2030 program year. We note that
the performance standards for the MSPB Hospital measure are based on
performance period data. Therefore, we are unable to provide numerical
equivalents for the standards at this time. The newly established
performance standards for these measures are set out in Table VI.L.-14.
[[Page 18300]]
Table VI.L.--14 Newly Established Performance Standards for the FY 2030
Program Year
------------------------------------------------------------------------
Achievement
Measure short name threshold Benchmark
------------------------------------------------------------------------
Clinical Outcomes Domain *
------------------------------------------------------------------------
MORT-30-AMI..................... 0.873975.......... 0.89371.
MORT-30-HF...................... 0.878881.......... 0.90929.
MORT-30-PN...................... 0.81782........... 0.858688.
MORT-30-COPD.................... 0.903404.......... 0.924332.
MORT-30-CABG.................... 0.972219.......... 0.9815.
COMP-HIP-KNEE **................ 0.028252.......... 0.019993.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB **......................... Median Medicare Mean of the lowest
Spending per decile Medicare
Beneficiary ratio Spending per
across all Beneficiary
hospitals during ratios across all
the performance hospitals during
period. the performance
period.
------------------------------------------------------------------------
* As discussed in section VI.L.2.a. and b. of the preamble of this
proposed rule, we are providing notice of a technical update for all
measures in the Clinical Outcomes Domain. While these performance
standards are unchanged at this time, we intend to update them in the
FY 2026 IPPS/LTCH PPS final rule.
** Lower values represent better performance.
g. Newly Established Performance Standards for Certain Measures for the
FY 2031 Program Year
As discussed previously, we have adopted certain measures for the
Clinical Outcomes domain (MORT-30-AMI, MORT-30-HF, MORT-30-PN, MORT-30-
COPD, MORT-30-CABG, and COMP-HIP-KNEE) and the Efficiency and Cost
Reduction domain (MSPB Hospital) for future program years to ensure
that we can adopt baseline and performance periods of sufficient length
for performance scoring purposes. In accordance with our methodology
for calculating performance standards discussed more fully in the
Hospital Inpatient VBP Program final rule (76 FR 26511 through 26512),
which is codified at 42 CFR 412.160, we are establishing the following
performance standards for the FY 2031 program year for the Clinical
Outcomes domain and the Efficiency and Cost Reduction domain. We note
that the performance standards for the MSPB Hospital measure are based
on performance period data. Therefore, we are unable to provide
numerical equivalents for the standards at this time. The newly
established performance standards for these measures are set out in
Table VI.L.-15.
Table VI.L.-15--Newly Established Performance Standards for the FY 2031
Program Year
------------------------------------------------------------------------
Achievement
Measure short name threshold Benchmark
------------------------------------------------------------------------
Clinical Outcomes Domain *
------------------------------------------------------------------------
MORT-30-AMI..................... 0.878523.......... 0.896695.
MORT-30-HF...................... 0.882749.......... 0.912451.
MORT-30-PN...................... 0.835165.......... 0.873917
MORT-30-COPD.................... 0.909324.......... 0.929745.
MORT-30-CABG.................... 0.975023.......... 0.983685.
COMP-HIP-KNEE **................ 0.036439.......... 0.02533.
------------------------------------------------------------------------
Efficiency and Cost Reduction Domain
------------------------------------------------------------------------
MSPB **......................... Median Medicare Mean of the lowest
Spending per decile Medicare
Beneficiary ratio Spending per
across all Beneficiary
hospitals during ratios across all
the performance hospitals during
period. the performance
period.
------------------------------------------------------------------------
* As discussed in section VI.L.2.a. and b. of the preamble of this
proposed rule, we are providing notice of a technical update to remove
the COVID-19 exclusion from the measure data for all measures in the
Clinical Outcomes Domain. As a result, these performance standards
have been calculated with the inclusion of COVID-19 data.
** Lower values represent better performance.
5. Proposals To Update the Extraordinary Circumstance Exception (ECE)
Policy for the Hospital VBP Program
(a) Background
Under our current Extraordinary Circumstances Exception (ECE)
regulations, we have granted exceptions with respect to Hospital VBP
Program requirements in the event of certain extraordinary
circumstances beyond the control of the hospital. We refer readers to
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45298 through 45299) and 42
CFR 412.165(c) for additional details related to the Hospital VBP
Program ECE policy. We also refer readers to the QualityNet website for
the specific requirements for submission of an ECE request in the
Hospital VBP Program.\257\
---------------------------------------------------------------------------
\257\ https://qualitynet.cms.gov/inpatient/hvbp/participation#tab6.
---------------------------------------------------------------------------
Our ECE policies provide flexibility for Hospital VBP program
participants to ensure continuity of quality care delivery and measure
scoring in the event of an extraordinary circumstance. For instance, we
recognize that, in circumstances where a full exception is not
applicable, it is beneficial for a hospital to report data later than
the reporting deadline. Delayed reporting authorized under our ECE
policy allows temporary relief for a hospital
[[Page 18301]]
experiencing an extraordinary circumstance while preserving the
benefits of data reporting such as transparency and informed decision-
making for beneficiaries and providers alike. Accordingly, we propose
to update our regulations to specify that an ECE could take the form of
an extension of time for a hospital to comply with a data reporting
requirement if CMS determines that this type of relief would be
appropriate under the circumstances.
(b) Proposal To Update the Extraordinary Circumstances Exception (ECE)
Policy for the Hospital VBP Program
We propose to update the current ECE policy codified at 42 CFR
412.165(c) to include extensions of time as a form of relief and to
further clarify the policy. Specifically, at proposed Sec.
412.165(c)(1), we propose that CMS may grant an ECE with respect to
reporting requirements in the event of an extraordinary circumstance--
defined as an event beyond the control of a hospital (for example, a
natural or man-made disaster such as a hurricane, tornado, earthquake,
terrorist attack, or bombing)--that affected the ability of the
hospital to comply with one or more applicable reporting requirements
with respect to a fiscal year.
We propose that the process for requesting or granting an ECE would
remain the same as the current ECE process, detailed by CMS at the
QualityNet website or a successor website.\258\ At proposed Sec.
412.165(c)(2)(i), we propose that a hospital may request an ECE within
30 calendar days of the date that the extraordinary circumstance
occurred. Our current policy allows a request within 90 days; however,
this proposed change would align to CMS systems implementation
requirements across all quality reporting programs. Under this proposed
codified policy, we clarify that CMS retains the authority to grant an
ECE as a form of relief at any time after the extraordinary
circumstance has occurred. At proposed Sec. 412.165(c)(2)(ii), we
propose that CMS notify the requestor with a decision in writing. In
the event that CMS grants an ECE to the hospital, the written decision
will specify whether the hospital is exempted from one or more
reporting requirements or whether CMS has granted the hospital an
extension of time to comply with one or more reporting requirements.
---------------------------------------------------------------------------
\258\ https://qualitynet.cms.gov/inpatient/iqr/participation#tab3.
---------------------------------------------------------------------------
Additionally, at Sec. 412.165(c)(3), we note that CMS may grant an
ECE to one or more hospitals that have not requested an ECE if CMS
determines either of the following: a systemic problem with a CMS data
collection system directly impacted the ability of the hospital to
comply with a quality data reporting requirement, or that an
extraordinary circumstance has affected an entire region or locale. As
is the case under our current policy, any ECE granted will specify
whether the affected hospitals are exempted from one or more reporting
requirements or whether CMS has granted the hospitals an extension of
time to comply with one or more reporting requirements.
This proposed ECE policy would provide further reporting
flexibility for hospitals and clarify the ECE process.
We invite public comment on our proposals.
6. Proposed Removal of the Health Equity Adjustment From the Hospital
VBP Program
In the FY 2024 IPPS/LTCH PPS final rule (88 FR 59092 through
59106), we adopted a Health Equity Adjustment (HEA) that, beginning
with the FY 2026 program year, rewards top performing hospitals that
serve higher proportions of patients with dual eligibility status. We
codified the HEA at Sec. Sec. 412.160 and 412.165(b) of our
regulations. Section 1886(o)(5)(A) of the Act authorizes the Secretary
to develop the methodology for assessing hospital performance based on
performance standards established with respect to the measures selected
for the Hospital VBP Program.
As discussed in the FY 2024 IPPS/LTCH PPS final rule, by providing
the HEA to hospitals that serve higher proportions of patients with
dual eligibility status and that perform well on quality measures, the
HEA would appropriately recognize the resource intensity expended to
achieve high performance on quality measures by hospitals that serve a
high proportion of patients with dual eligibility status, while also
mitigating the worse health outcomes experienced by dually eligible
patients through incentivizing better care across all hospitals.
In this proposed rule, we are proposing to remove the HEA because
simplifying the Hospital VBP Program's scoring methodology by removing
the HEA will improve hospitals' understanding of the program and
provide clearer incentives to hospitals as they seek to improve the
quality of care for all patients. As noted in section I.G. of Appendix
A of this proposed rule, in Table I.G.6.-01 and Table I.G.6.-02 the
overall impact of the HEA on the overall payment adjustments is small.
With the HEA, the average net percentage payment adjustment for FY 2026
is 0.170% and without the HEA, the average net percentage payment
adjustment is 0.168%. Given this relatively small impact, and in light
of the Administration's priority to streamline regulations and reduce
burdens on those participating in the Medicare program, we are
proposing to remove the HEA at this time. We refer readers to
Supplementary Information section of this proposed rule for the
Unleashing Prosperity Through Deregulation of the Medicare Program--
Request for Information for more information.
We considered altering the structure of the adjustment methodology
to simplify it, but that process will require time to develop and test
a new adjustment and, if pursued, would be addressed in future
rulemaking.
We do not anticipate any serious reliance interests as a result of
this proposal since the HEA does not require any additional reporting
burden.
We propose to codify this removal of the HEA by removing the
definition of ``Health equity adjustment bonus points'' in Sec.
412.160 of our regulations and revising Sec. 412.165(b) to remove the
calculation and addition of health equity adjustment bonus points from
the Total Performance Score calculation beginning with the FY 2026
program year. We refer readers to Table I.G.6.-01 and Table I.G.6.-02
in K-CF, Section 6: Effects of Changes Under the FY 2026 Hospital
Value-Based Purchasing (VBP) Program, which reflect an estimated impact
analysis of base operating DRG payment amounts resulting from the FY
2026 Hospital VBP Program with and without the HEA, respectively.
We welcome public comment on these proposals.
M. Hospital-Acquired Condition Reduction Program Updates and Changes
(HACRP)
1. Regulatory Background
We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR
50707 through 50709) for a general overview of the Hospital-Acquired
Condition (HAC) Reduction Program and a detailed discussion of the
statutory basis for the Program. We also refer readers to 42 CFR
412.170 through 412.172 for codified HAC Reduction Program
requirements.
2. Measures for FY 2026 and Subsequent Years in the HAC Reduction
Program
a. Current Measures
The previously finalized measures for the HAC Reduction Program for
FY
[[Page 18302]]
2026 and subsequent years are shown in table VI.M.-01. Technical
specifications for the CMS Patient Safety and Adverse Events Composite
(CMS PSI 90) measure can be found on the QualityNet website available
at: https://qualitynet.cms.gov/inpatient/measures/psi/resources.
Technical specifications for the Centers for Disease Control and
Prevention's (CDC) National Healthcare Safety Network (NHSN)
healthcare-associated infection (HAI) measures can be found at the
CDC's NHSN website at: https://www.cdc.gov/nhsn/acute-care-hospital/index.html and on the QualityNet website available at: https://qualitynet.cms.gov/inpatient/measures/hai/resources. These web pages
provide measure updates and other information necessary to guide
hospitals participating in the collection of HAC Reduction Program
data.
Table VI.M.-01--HAC Reduction Program Measures for FY 2026 and
Subsequent Years
------------------------------------------------------------------------
Consensus-
Short name Measure name based entity
(CBE) No.
------------------------------------------------------------------------
HAC Reduction Program Measures for FY 2026 and Subsequent Years
------------------------------------------------------------------------
CMS PSI 90..................... CMS Patient Safety and 0531
Adverse Events
Composite.
CAUTI.......................... CDC NHSN Catheter- 0138
associated Urinary
Tract Infection
(CAUTI) Outcome
Measure.
CDI............................ CDC NHSN Facility-wide 1717
Inpatient Hospital-
onset Clostridium
difficile Infection
(CDI) Outcome Measure.
CLABSI......................... CDC NHSN Central Line- 0139
Associated Bloodstream
Infection (CLABSI)
Outcome Measure.
Colon and Abdominal American College of 0753
Hysterectomy SSI. Surgeons--Centers for
Disease Control and
Prevention (ACS-CDC)
Harmonized Procedure
Specific Surgical Site
Infection (SSI)
Outcome Measure.
MRSA Bacteremia................ CDC NHSN Facility-wide 1716
Inpatient Hospital-
onset Methicillin-
resistant
Staphylococcus aureus
(MRSA) Bacteremia
Outcome Measure.
------------------------------------------------------------------------
We are not proposing to add or remove any measures in this proposed
rule. We refer readers to section I.G.9. of Appendix A of this proposed
rule for an updated estimate of the impact of the Program policies on
the proportion of hospitals in the worst performing quartile of Total
HAC Scores for the FY 2026 HAC Reduction Program.
b. Technical Update to CDC's National Healthcare Safety Network
Healthcare-Associated Infection Measures for the HAC Reduction Program
In this section, we provide information regarding upcoming changes
to the standard population data that are used to calculate the
standardized infection ratio (SIR) for the CDC's NHSN measures. These
changes are occurring as part of routine measure maintenance.
CDC's NHSN measures are used to monitor hospital performance on
prevention of healthcare-associated infections (HAIs). For each NHSN
measure, CDC calculates the SIR, which compares a hospital's observed
number of HAIs to the number of infections predicted for the hospital,
adjusting for several risk factors. The predicted number of infections
is determined using the amount of exposure (for example, the number of
central line days when predicting CLABSI events) for a given hospital
according to the relevant observed risk factors and infection rates for
the same combination of risk factors that occurred among a standard
population during a specified period as reflected by the appropriate
risk adjustment model (this is sometimes referred to as a ``baseline,''
\259\ but referred to here as ``standard population data''). This set
of rates forms standard population data that promotes timely
comparisons to measure change in an outcome. Since 2016, CDC has been
using data collected in CY 2015 to determine the standard population
and, currently, the 2015 standard population is used to calculate the
HAI measures in the HAC Reduction Program.\260\ Prior to 2016,
calculated SIRs had different standard population years for each
infection type and facility type.\261\
---------------------------------------------------------------------------
\259\ ``Rebaseline'' is a term that CDC's NHSN staff use to
describe the process of updating the national HAI baseline data and
risk adjustment models developed using these data. As part of
routine measure maintenance, CDC has updated the baseline to ensure
the number of predicted infections used in SIR calculations reflects
the current state of HAIs in the United States using CY 2022 data.
The CDC released its initial announcement of this rebaseline in June
2023. Resources and training regarding the 2015 and 2022 standard
population data can be found at: https://www.cdc.gov/nhsn/nhsnrebaseline/index.html.
\260\ Centers for Disease Control and Prevention. CHARTING THE
COURSE: 2022 HAI REBASELINE. Available at: https://www.cdc.gov/nhsn/pdfs/rebaseline/22-Rebaseline-FAQs-Final-Version.pdf.
\261\ Centers for Disease Control and Prevention. Paving the
Path Forward: 2015 Rebaseline. Available at: https://www.cdc.gov/nhsn/2015rebaseline/index.html.
---------------------------------------------------------------------------
During this update, HAI SIR calculations of infections reported
beginning in CY 2025 will reflect the use of both the new 2022 standard
population data and the 2015 standard population data. We anticipate
that the new 2022 standard population data will affect the HAC
Reduction Program beginning with the FY 2028 program year when both
years of the 2-year applicable period (also referred to as the
``performance period'' of the measures), CY 2025 and CY 2026, will use
the 2022 update to the standard population for the CDC's NHSN measures.
Under the HAC Reduction Program, confidential reports are made
available to hospitals with respect to HACs of the hospital during the
applicable period (78 FR 50708 through 50709). In the FY 2019 IPPS/LTCH
PPS final rule (83 FR 41484 through 41489), we clarified the Scoring
Calculations Review and Correction Period (83 FR 41484) for the HAC
Reduction Program, which provides hospitals with detailed HAC Reduction
Program data and results in confidential Hospital-Specific Reports
(HSRs). We give hospitals 30 days to review their HAC Reduction Program
data, submit questions about the calculation of their results, and
request corrections prior to such information being made public.\262\
The HAI measures using the 2022 update to the standard population in
the FY 2028 HAC Reduction Program dataset would be publicly reported on
the Provider Data Catalog in early 2028.
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\262\ For more information on the Scoring Calculations Review
and Correction Period, see: https://qualitynet.cms.gov/inpatient/hac/payment#tab2.
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For the HAI measure information publicly reported on the Compare
tool
[[Page 18303]]
on Medicare.gov, it will continue to display on a quarterly basis
calculated from a rolling four quarters of data. The HAI measures using
the 2022 update to the standard population data will begin to be
publicly reported on the Compare tool in fall 2026 using four quarters
of CY 2025 data.
Table VI.M.-02--CDC Baseline Data on the Compare Tool
------------------------------------------------------------------------
Standard
Performance period for CDC NHSN population Public reporting
HAI measures data year
------------------------------------------------------------------------
October 1, 2024, to September 2015 Summer 2026.
30, 2025.
January 1, 2025, to December 2022 Fall 2026.
31, 2025.
------------------------------------------------------------------------
As we stated in the FY 2018 IPPS/LTCH PPS final rule (82 FR 38324),
our current policy has been to report data as soon as it is feasible on
CMS websites such as the Compare tool and the Provider Data Catalog,
after a 30-day preview period.\263\ Table VI.M.-03 summarizes the HAI
performance periods, the standard population data year, HAC Reduction
Program year, and public reporting timeframe for the CDC's NHSN
measures.
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\263\ For more information on the Care Compare Preview period,
see: https://qualitynet.cms.gov/inpatient/public-reporting/public-reporting/hospital-compare-preview.
Table VI.M.-03--CDC Baseline Data in the HAC Reduction Program
----------------------------------------------------------------------------------------------------------------
Standard
HAC Reduction Program year Performance period for CDC population Public reporting
NHSN HAI measures data year
----------------------------------------------------------------------------------------------------------------
FY 2025............................. January 1, 2022, to December 2015 Early 2025.
31, 2023.
FY 2026............................. January 1, 2023, to December 2015 Early 2026.
31, 2024.
FY 2027............................. January 1, 2024, to December 2015 Early 2027.
31, 2025.
FY 2028............................. January 1, 2025, to December 2022 Early 2028.
31, 2026.
----------------------------------------------------------------------------------------------------------------
We refer readers to section VI.L.4.b of this proposed rule, where
we are proposing updates to the standard population data for the CDC's
NHSN HAI measures in the Hospital Value-Based Purchasing (VBP) Program.
While we are not required to solicit comments on technical updates,
we invite public comment on this technical update.
3. Proposal To Codify the Extraordinary Circumstances Exception Policy
for the HAC Reduction Program
a. Background
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45309 through
45310), we clarified that an Extraordinary Circumstances Exception
(ECE) granted under the HAC Reduction Program may allow an exception
from quality data reporting requirements and may grant a request to
exclude any data submitted (whether submitted for claims purposes or to
the CDC's NHSN) from the calculation of a hospital's measure results or
Total HAC Score for the applicable period or both, depending on the
exact circumstances under which the request was made. We intend to
provide relief for a hospital whose ability to accurately collect
quality measure data and to report those data in a timely manner has
been negatively impacted as a direct result of experiencing a
significant disaster or other extraordinary circumstance beyond the
control of a hospital (80 FR 49579 through 49581) or both. An exception
may be granted for extraordinary circumstances including, but not
limited to, natural disasters or systemic problems with data collection
systems.\264\ We refer readers to the FY 2016 IPPS/LTCH PPS final rule
(80 FR 49579 through 49581), FY 2018 IPPS/LTCH PPS final rule (82 FR
38276 through 38278), and FY 2022 IPPS/LTCH PPS final rule (86 FR 45308
through 45310) for further background and details of our ECE policy. We
also refer readers to the QualityNet website for the specific
requirements for submission of an ECE request in the HAC Reduction
Program.\265\ Hospitals can request a CMS Quality Program ECE for
multiple programs based on the same extraordinary circumstance using
one ECE request form, including the Hospital IQR Program, the Hospital
VBP Program, and the Hospital Readmissions Reduction Program.
---------------------------------------------------------------------------
\264\ Centers for Medicare & Medicaid Services (CMS) Quality
Program Extraordinary Circumstances Exceptions (ECE) Request Form.
(2025). QualityNet. Available at: https://qualitynet.cms.gov/files/677e843f50ed8df7419f60e1?filename=HQR_ECE_Req_Form_CY_2025.pdf.
\265\ CMS QualityNet. Available at: https://qualitynet.cms.gov/inpatient/hac/participation#tab2.
---------------------------------------------------------------------------
Our ECE policy provides flexibility for HAC Reduction Program
participants to ensure continuity of quality care delivery and measure
reporting in the event of an extraordinary circumstance. For instance,
we recognize that, in circumstances where an exclusion of any data
submitted from the calculation of a hospital's measure results or Total
HAC Score for the applicable period is not applicable, it may be
beneficial for a hospital to report data later than the reporting
deadline. Delayed reporting authorized under the ECE policy would allow
temporary relief for a hospital experiencing an extraordinary
circumstance, while preserving data reporting benefits such as
transparency and informed decision-making for beneficiaries and
providers alike. Accordingly, we propose to specify that an ECE could
take the form of an extension of time for a hospital to comply with a
data reporting requirement if CMS determines that this type of relief
would be appropriate under the circumstances.
b. Proposals To Codify the Extraordinary Circumstances Exception (ECE)
Policy for the HAC Reduction Program
We propose to codify the ECE policy at 42 CFR 412.172(c) and
include extensions of time as a form of relief. Specifically, at
proposed Sec. 412.172(c)(1), we propose that CMS may grant an ECE with
respect to reporting requirements in the event of an extraordinary
[[Page 18304]]
circumstance--defined as an event beyond the control of a hospital (for
example a natural or man-made disaster such as a hurricane, tornado,
earthquake, terrorist attack, or bombing)--that affected the ability of
the hospital to comply with one or more applicable reporting
requirements with respect to a fiscal year.
We propose that the process for requesting or granting an ECE would
remain the same as the current ECE process, detailed by CMS at the
QualityNet website or a successor website.\266\ At proposed Sec.
412.172(c)(2)(i), we propose that a hospital may request an ECE within
30 calendar days of the date that the extraordinary circumstance
occurred. Under this proposed policy, we clarify that CMS retains the
authority to grant an ECE as a form of relief at any time after the
extraordinary circumstance has occurred. At proposed Sec.
412.172(c)(2)(ii), we propose that CMS notify the requestor with a
decision in writing, via email. In the event that CMS grants an ECE to
the hospital, the written decision will specify whether the hospital is
exempted from one or more reporting requirements or whether CMS has
granted the hospital an extension of time to comply with one or more
reporting requirements.
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\266\ https://qualitynet.cms.gov/inpatient/iqr/participation#tab3.
---------------------------------------------------------------------------
Additionally, at Sec. 412.172(c)(3), we note that CMS may grant an
ECE to one or more hospitals that have not requested an ECE if CMS
determines that: a systemic problem with a CMS data collection system
directly impacted the ability of the hospital to comply with a quality
data reporting requirement, or that an extraordinary circumstance has
affected an entire region or locale. Any ECE granted will specify
whether the affected hospitals are exempted from one or more reporting
requirements or whether CMS has granted the hospitals an extension of
time to comply with one or more reporting requirements.
The ECE policy is intended to provide hospitals with further
reporting flexibility and clarity regarding expectations when
submitting ECE requests for participants of the HAC Reduction Program.
We refer readers to sections X.C.8, VI.L.5, VI.K.3.c., and X.D.4. of
the preamble of this proposed rule for similar proposals in the
Hospital IQR Program, Hospital VBP Program, Hospital Readmissions
Reduction Program, and PCHQR Program, respectively.
We invite public comment on our proposals.
N. Rural Community Hospital Demonstration Program
1. Introduction
The Rural Community Hospital Demonstration was originally
authorized by section 410A of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173). The
demonstration has been extended three times since the original 5-year
period mandated by the MMA, each time for an additional 5 years. These
extensions were authorized by sections 3123 and 10313 of the Affordable
Care Act (Pub. L. 111-148), section 15003 of the 21st Century Cures Act
(Pub. L. 114-255) (Cures Act) enacted in 2016, and most recently, by
section 128 of the Consolidated Appropriations Act, 2021 (Pub. L. 116-
260), which also reauthorized the RCHD for five years. Below we
summarize the status of the demonstration program and the current
methodologies for implementation and calculating budget neutrality, and
propose the amount to be subtracted from the national IPPS payment
rates to account for the costs of the demonstration in FY 2026. The
amount would include the reconciled amount of demonstration costs for
FY 2020 in the FY 2026 IPPS/LTCH final rule. We expect all finalized
cost reports for FY 2020 to be available when the FY 2026 IPPS/LTCH
final rule is published.
Last year we published a new solicitation (89 FR 105049) to select
10 additional qualifying hospitals to participate in the Rural
Community Hospital Demonstration. We only accepted applications to this
solicitation from hospitals in the 20 least densely populated States,
according to data for 2020 from the U.S. Census Bureau. These States
are: Alaska, Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine,
Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota,
Oklahoma, Oregon, South Dakota, Utah, Vermont, and Wyoming. We did not
accept applications from hospitals located in other States or in the
U.S. territories. Applications were due March 1, 2025; we will be
selecting hospitals on a rolling basis beginning May 1, 2025. Given the
upcoming statutory termination of the model, we are aligning
performance dates for the selected hospitals with the last performance
day for the currently authorized extension; therefore, although
previous agreements ran for 5-year periods, agreements for hospitals
selected under CMS-5051-N2 will run only until June 30, 2028.
2. Background
Section 410A(a) of the MMA (Pub. L. 108-173) required the Secretary
to establish a demonstration program to test the feasibility and
advisability of establishing rural community hospitals to furnish
covered inpatient hospital services to Medicare beneficiaries. The
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient
hospital services furnished to Medicare beneficiaries. A rural
community hospital, as defined in section 410A(f)(1), is a hospital
that--
Is located in a rural area (as defined in section
1886(d)(2)(D) of the Act) or is treated as being located in a rural
area under section 1886(d)(8)(E) of the Act;
Has fewer than 51 beds (excluding beds in a distinct part
psychiatric or rehabilitation unit) as reported in its most recent cost
report;
Provides 24-hour emergency care services; and
Is not designated or eligible for designation as a CAH
under section 1820 of the Act.
Our policy for implementing the 5-year extension period authorized
by the CAA, 2021 (Pub. L. 116-260) follows upon the previous extensions
under the Affordable Care Act (Pub. L. 111-148) and the Cures Act (Pub.
L. 114-255). Section 410A of the MMA (Pub. L. 108-173) initially
required a 5-year period of performance. Subsequently, sections 3123
and 10313 of the Affordable Care Act (Pub. L. 111-148) required the
Secretary to conduct the demonstration program for an additional 5-year
period, to begin on the date immediately following the last day of the
initial 5-year period. In addition, the Affordable Care Act (Pub. L.
111-148) limited the number of hospitals participating to no more than
30. Section 15003 of the Cures Act (Pub. L. 114-255) required a 10-year
extension period in place of the 5-year extension period under the
Affordable Care Act (Pub. L. 111-148), thereby extending the
demonstration for another 5 years. Section 128 of CAA, 2021 (Pub. L.
116-260), in turn, revised the statute to indicate a 15-year extension
period, instead of the 10-year extension period mandated by the Cures
Act (Pub. L. 114-255). Please refer to the FY 2023 IPPS proposed and
final rules (87 FR 28454 through 28458 and 87 FR 49138 through 49142,
respectively) for an account of hospitals entering into and withdrawing
from the demonstration with these re-authorizations. There are
currently 20 hospitals participating in the demonstration.
[[Page 18305]]
2. Budget Neutrality
a. Statutory Budget Neutrality Requirement
Section 410A(c)(2) of the MMA (Pub. L. 108-173) requires that, in
conducting the demonstration program under this section, the Secretary
shall ensure that the aggregate payments made by the Secretary do not
exceed the amount that the Secretary would have paid if the
demonstration program under this section was not implemented. This
requirement is commonly referred to as ``budget neutrality.''
Generally, when we implement a demonstration program on a budget
neutral basis, the demonstration program is budget neutral on its own
terms; in other words, the aggregate payments to the participating
hospitals do not exceed the amount that would be paid to those same
hospitals in the absence of the demonstration program. We note that the
payment methodology for this demonstration, that is, cost-based
payments to participating small rural hospitals, made it unlikely that
increased Medicare outlays would produce an offsetting reduction to
Medicare expenditures elsewhere. Therefore, in the IPPS final rules
spanning the period from FY 2005 through FY 2016, we adjusted the
national IPPS rates by an amount sufficient to account for the added
costs of this demonstration program, thus applying budget neutrality
across the payment system as a whole rather than merely across the
participants in the demonstration program. (We applied a different
methodology for FY 2017, with the demonstration expected to end prior
to the Cures Act extension.) As we discussed in the FYs 2005 through
2017 IPPS/LTCH PPS final rules (69 FR 49183; 70 FR 47462; 71 FR 48100;
72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 76 FR 51698, 77 FR
53449, 78 FR 50740, 77 FR 50145; 80 FR 49585; and 81 FR 57034,
respectively), we believe that the statutory language of the budget
neutrality requirements permits the agency to implement the budget
neutrality provision in this manner.
We resumed this methodology of offsetting demonstration costs
against the national payment rates in the IPPS final rules from FY 2018
through FY 2025. Please see the FY 2025 IPPS final rule for an account
of how we applied the budget neutrality requirement for these fiscal
years (89 FR 69412 through 69413).
b. General Budget Neutrality Methodology
We have generally incorporated two components into the budget
neutrality offset amounts identified in the final IPPS rules in
previous years. First, we have estimated the costs of the demonstration
for the upcoming fiscal year, generally determined from historical,
``as submitted'' cost reports for the hospitals participating in that
year. Updated factors representing nationwide trends in cost and volume
increases have been incorporated into these estimates, as specified in
the methodology described in the final rule for each fiscal year.
Second, as finalized cost reports became available, we determined the
amount by which the actual costs of the demonstration for an earlier,
given year differed from the estimated costs for the demonstration set
forth in the final IPPS rule for the corresponding fiscal year, and
incorporated that amount into the budget neutrality offset amount for
the upcoming fiscal year. If the actual costs for the demonstration for
the earlier fiscal year exceeded the estimated costs of the
demonstration identified in the final rule for that year, this
difference was added to the estimated costs of the demonstration for
the upcoming fiscal year when determining the budget neutrality
adjustment for the upcoming fiscal year. Conversely, if the estimated
costs of the demonstration set forth in the final rule for a prior
fiscal year exceeded the actual costs of the demonstration for that
year, this difference was subtracted from the estimated cost of the
demonstration for the upcoming fiscal year when determining the budget
neutrality adjustment for the upcoming fiscal year.
We note that we have calculated this difference for FYs 2005
through 2018 between the actual costs of the demonstration as
determined from finalized cost reports once available, and estimated
costs of the demonstration as identified in the applicable IPPS final
rules for these years.
c. Budget Neutrality Methodology for the Extension Period Authorized by
CAA, 2021
For the most-recently enacted extension period, under the CAA,
2021, we have continued upon the general budget neutrality methodology
used in previous years, as described previously in the citations to
earlier IPPS final rules. In this proposed rule, we outline the
methodology to be used for determining the offset to the national IPPS
payment rates for FY 2026.
(1) Methodology for Estimating Demonstration Costs for FY 2026
Consistent with the general methodology from previous years, we are
estimating the costs of the demonstration for the upcoming fiscal year,
and proposing to incorporate this estimate into the budget neutrality
offset amount to be applied to the national IPPS rates for the upcoming
fiscal year, that is, FY 2026. We are conducting this estimate for FY
2026 based on the 20 currently participating hospitals. The methodology
for calculating this amount for FY 2026 proceeds according to the
following steps:
Step 1: For each of these 20 hospitals, we identify the reasonable
cost amount calculated under the reasonable cost-based methodology for
covered inpatient hospital services, including swing beds, as indicated
on the ``as submitted'' cost report for the most recent cost reporting
period available. The ``as submitted'' cost report, submitted by each
of the 20 hospitals, with a report end date in CY2023 is used. We sum
these hospital -specific amounts to arrive at a total general amount
representing the costs for covered inpatient hospital services,
including swing beds, across the total 20 hospitals eligible to
participate during FY 2026.
Then, we multiply the total general amount by the FYs 2024, 2025,
and 2026 IPPS market basket percentage increases, which are calculated
by the CMS Office of the Actuary. (We are using the proposed market
basket percentage increase for FY 2026, which can be found at section
VI.B.1. of the preamble to this proposed rule). The result for the 20
hospitals is the general estimated reasonable cost amount for covered
inpatient hospital services for FY 2026.
Consistent with our methods in previous years for formulating this
estimate, we are applying the IPPS market basket percentage increases
for FYs 2024 through 2026 to the applicable estimated reasonable cost
amount (previously described) to model the estimated FY 2026 reasonable
cost amount under the demonstration. We believe that the IPPS market
basket percentage increases appropriately indicate the trend of
increase in inpatient hospital operating costs under the reasonable
cost methodology for the years involved.
Step 2: For each of the participating hospitals, we identify the
estimated amount that would otherwise have been paid in FY 2026 under
applicable Medicare payment methodologies for covered inpatient
hospital services, including swing beds (as indicated on the same set
of ``as submitted'' cost reports as in Step 1), if the demonstration
had not been implemented. We sum these hospital-
[[Page 18306]]
specific amounts, and, in turn, multiply this sum by the FYs 2024,
2025, and 2026 IPPS applicable percentage increases. (For FY 2026, we
are using the proposed applicable percentage increase, per section
VI.B.1. of the preamble of this proposed rule). This methodology
differs from Step 1, in which we apply the market basket percentage
increases to the hospitals' applicable estimated reasonable cost amount
for covered inpatient hospital services. We believe that the IPPS
applicable percentage increases are appropriate factors to update the
estimated amounts that generally would otherwise be paid without the
demonstration because IPPS payments constitute the majority of payments
that would otherwise be made without the demonstration and the
applicable percentage increase is the factor used under the IPPS to
update the inpatient hospital payment rates.
Step 3: We subtract the amount derived in Step 2 from the amount
derived in Step 1. According to our methodology, the resulting amount
indicates the total difference for the 20 hospitals (for covered
inpatient hospital services, including swing beds), which will be the
general estimated amount of the costs of the demonstration for FY 2026.
For this proposed rule, the resulting amount is $47,527,557, which,
if finalized, would be incorporated into the budget neutrality offset
adjustment for FY 2026. This estimated amount is based on the specific
assumptions regarding the data sources used, that is, recently
available ``as submitted'' cost reports and historical update factors
for cost and payment. If updated data become available prior to the
final rule, we will use them as appropriate to estimate the costs for
the demonstration program for FY 2026 in accordance with our
methodology for determining the budget neutrality estimate. We will
also incorporate any statutory change that might affect the methodology
for determining hospital costs either with or without the
demonstration. We are proposing to include estimated costs of the
demonstration for FY 2026 for all participating hospitals, to include
those participating as a result of the current solicitation, in the
budget neutrality offset adjustment in the FY 2027 IPPS proposed and
final rules.
(2) Reconciling Actual and Estimated Costs of the Demonstration for
Previous Years
As described earlier, we have calculated the difference for FYs
2005 through 2018 between the actual costs of the demonstration, as
determined from finalized cost reports once available, and estimated
costs of the demonstration as identified in the applicable IPPS final
rules for these years.
At this time, for the FY 2026 proposed rule, not all of the
finalized cost reports are available for the 20 hospitals that
completed cost report periods beginning in FY 2020 under the
demonstration payment methodology. We expect all of these finalized
cost reports to be available by the time of the final rule, and thus we
are proposing to include the difference between the actual cost of the
demonstration for FY 2020 as determined from finalized cost reports
within the budget neutrality offset amount in the FY 2026 final rule.
(3) Total Proposed Budget Neutrality Offset Amount for FY 2026
For this FY 2026 IPPS/LTCH PPS proposed rule, the proposed budget
neutrality offset amount for FY 2026 is the amount determined under
section X.2.c.(2). of the preamble of this proposed rule, representing
the difference applicable to FY 2026 between the sum of the estimated
reasonable cost amounts that would be paid under the demonstration for
covered inpatient services to the 20 hospitals eligible to participate
in the fiscal year and the sum of the estimated amounts that would
generally be paid if the demonstration had not been implemented. This
estimated amount is $47,527,557.
However, we note, that the overall amount might change if there are
any revisions prior to the final rule to the data used to formulate
this estimate. We also expect to revise the budget neutrality offset
amount upon calculating the actual costs of the demonstration for FY
2020, after receiving all of the finalized cost reports for that fiscal
year.
VII. Proposed Changes to the IPPS for Capital-Related Costs
A. Overview
Section 1886(g) of the Act requires the Secretary to pay for the
capital-related costs of inpatient acute hospital services in
accordance with a prospective payment system established by the
Secretary. Under the statute, the Secretary has broad authority in
establishing and implementing the IPPS for acute care hospital
inpatient capital-related costs. We initially implemented the IPPS for
capital-related costs in the FY 1992 IPPS final rule (56 FR 43358). In
that final rule, we established a 10-year transition period to change
the payment methodology for Medicare hospital inpatient capital-related
costs from a reasonable cost-based payment methodology to a prospective
payment methodology (based fully on the Federal rate).
FY 2001 was the last year of the 10-year transition period that was
established to phase in the IPPS for hospital inpatient capital-related
costs. For cost reporting periods beginning in FY 2002, capital IPPS
payments are based solely on the Federal rate for almost all acute care
hospitals (other than hospitals receiving certain exception payments
and certain new hospitals). (We refer readers to the FY 2002 IPPS final
rule (66 FR 39910 through 39914) for additional information on the
methodology used to determine capital IPPS payments to hospitals both
during and after the transition period.)
The basic methodology for determining capital prospective payments
using the Federal rate is set forth in the regulations at 42 CFR
412.312. For the purpose of calculating capital payments for each
discharge, the standard Federal rate is adjusted as follows:
(Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment Factor
(GAF) x (COLA for hospitals located in Alaska and Hawaii) x (1 +
Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if
applicable).
In addition, under Sec. 412.312(c), hospitals also may receive
outlier payments under the capital IPPS for extraordinarily high-cost
cases that qualify under the thresholds established for each fiscal
year.
B. Additional Provisions
1. Exception Payments
The regulations at 42 CFR 412.348 provide for certain exception
payments under the capital IPPS. The regular exception payments
provided under Sec. 412.348(b) through (e) were available only during
the 10-year transition period. For a certain period after the
transition period, eligible hospitals may have received additional
payments under the special exceptions provisions at Sec. 412.348(g).
However, FY 2012 was the final year hospitals could receive special
exceptions payments. For additional details regarding these exceptions
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76
FR 51725).
Under Sec. 412.348(f), a hospital may request an additional
payment if the hospital incurs unanticipated capital expenditures in
excess of $5 million due to extraordinary circumstances beyond
[[Page 18307]]
the hospital's control. Additional information on the exception payment
for extraordinary circumstances in Sec. 412.348(f) can be found in the
FY 2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
Under the capital IPPS, the regulations at 42 CFR 412.300(b) define
a new hospital as a hospital that has operated (under previous or
current ownership) for less than 2 years and lists examples of
hospitals that are not considered new hospitals. In accordance with
Sec. 412.304(c)(2), under the capital IPPS, a new hospital is paid 85
percent of its allowable Medicare inpatient hospital capital related
costs through its first 2 years of operation, unless the new hospital
elects to receive full prospective payment based on 100 percent of the
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule
(76 FR 51725) for additional information on payments to new hospitals
under the capital IPPS.
3. Payments for Hospitals Located in Puerto Rico
In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57061), we revised
the regulations at 42 CFR 412.374 relating to the calculation of
capital IPPS payments to hospitals located in Puerto Rico beginning in
FY 2017 to parallel the change in the statutory calculation of
operating IPPS payments to hospitals located in Puerto Rico, for
discharges occurring on or after January 1, 2016, made by section 601
of the Consolidated Appropriations Act, 2016 (Pub. L. 114-113). Section
601 of Public Law 114-113 increased the applicable Federal percentage
of the operating IPPS payment for hospitals located in Puerto Rico from
75 percent to 100 percent and decreased the applicable Puerto Rico
percentage of the operating IPPS payments for hospitals located in
Puerto Rico from 25 percent to zero percent, applicable to discharges
occurring on or after January 1, 2016. As such, under revised Sec.
412.374, for discharges occurring on or after October 1, 2016, capital
IPPS payments to hospitals located in Puerto Rico are based on 100
percent of the capital Federal rate.
C. Proposed Annual Update for FY 2026
The proposed annual update to the national capital Federal rate, as
provided for in 42 CFR 412.308(c), for FY 2026 is discussed in section
III. of the Addendum to this FY 2026 IPPS/LTCH PPS proposed rule.
We also note that in section II.D. of the preamble of this proposed
rule, we discuss our proposed revision to the adjustment to the payment
amount for certain clinical trial or expanded access use immunotherapy
cases to include other cases where the immunotherapy product is not
purchased in the usual manner (such as provided at no cost) that will
group to MS-DRG 018 for both operating IPPS payments and capital IPPS
payments. We refer readers to section II.D. of this preamble for
additional details on the proposed payment adjustment for these cases.
VIII. Proposed Changes for Hospitals Excluded From the IPPS
A. Proposed Rate-of-Increase in Payments to Excluded Hospitals for FY
2026
Certain hospitals excluded from a prospective payment system,
including children's hospitals, 11 cancer hospitals, and hospitals
located outside the 50 States, the District of Columbia, and Puerto
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa) receive payment for
inpatient hospital services they furnish on the basis of reasonable
costs, subject to a rate-of-increase ceiling. A per discharge limit
(the target amount, as defined in Sec. 413.40(a) of the regulations)
is set for each hospital based on the hospital's own cost experience in
its base year, and updated annually by a rate-of-increase percentage.
For each cost reporting period, the updated target amount is multiplied
by total Medicare discharges during that period and applied as an
aggregate upper limit (the ceiling as defined in Sec. 413.40(a)) of
Medicare reimbursement for total inpatient operating costs for a
hospital's cost reporting period. In accordance with Sec. 403.752(a)
of the regulations, religious nonmedical health care institutions
(RNHCIs) also are subject to the rate-of-increase limits established
under Sec. 413.40 of the regulations discussed previously.
Furthermore, in accordance with Sec. 412.526(c)(3) of the regulations,
extended neoplastic disease care hospitals (formerly classified as
``Subclause II LTCs'') also are subject to the rate-of-increase limits
established under Sec. 413.40 of the regulations discussed previously.
As explained in the FY 2006 IPPS final rule (70 FR 47396 through
47398), beginning with FY 2006, we have used the percentage increase in
the IPPS operating market basket to update the target amounts for
children's hospitals, the 11 cancer hospitals, and RNHCIs.
Consistent with the regulations at Sec. Sec. 412.23(g) and
413.40(a)(2)(ii)(A) and (c)(3)(viii), we also have used the percentage
increase in the IPPS operating market basket to update target amounts
for short-term acute care hospitals located in the U.S. Virgin Islands,
Guam, the Northern Mariana Islands, and American Samoa. In the FY 2022
IPPS/LTCH PPS final rule (86 FR 45194 through 45207), we rebased and
revised the IPPS operating market basket to a 2018 base year, and
finalized the use of the percentage increase in the 2018-based IPPS
operating market basket to update the target amounts for children's
hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa for FY 2022 and subsequent fiscal
years. As discussed in section IV. of the preamble of this FY 2026
IPPS/LTCH PPS proposed rule, we are proposing to rebase and revise the
IPPS operating basket to a 2023 base year. Therefore, we are proposing
to use the percentage increase in the proposed 2023-based IPPS
operating market basket to update the target amounts for children's
hospitals, the 11 cancer hospitals, RNHCIs, and short-term acute care
hospitals located in the U.S. Virgin Islands, Guam, the Northern
Mariana Islands, and American Samoa for FY 2026 and subsequent fiscal
years. Accordingly, for FY 2026, the rate-of-increase percentage to be
applied to the target amount for these hospitals would be the FY 2026
percentage increase in the proposed 2023-based IPPS operating market
basket.
For the FY 2026 IPPS/LTCH PPS proposed rule, based on IGI's 2024
fourth quarter forecast, we estimate that the proposed 2023-based IPPS
operating market basket percentage increase for FY 2026 is 3.2 percent
(that is, the estimate of the market basket rate-of-increase). Based on
this estimate, the FY 2026 rate-of-increase percentage that will be
applied to the FY 2025 target amounts in order to calculate the FY 2026
target amounts for children's hospitals, the 11 cancer hospitals,
RNHCIs, and short-term acute care hospitals located in the U.S. Virgin
Islands, Guam, the Northern Mariana Islands, and American Samoa is 3.2
percent, in accordance with the applicable regulations at 42 CFR
413.40. However, we are proposing that if more recent data become
available for the FY 2026 IPPS/LTCH PPS final rule, we would use such
data, if appropriate, to calculate the final IPPS operating market
basket update for FY 2026.
In addition, payment for inpatient operating costs for hospitals
classified under section 1886(d)(1)(B)(vi) of the Act (which we refer
to as ``extended neoplastic disease care hospitals'') for
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cost reporting periods beginning on or after January 1, 2015, is to be
made as described in 42 CFR 412.526(c)(3), and payment for capital
costs for these hospitals is to be made as described in 42 CFR
412.526(c)(4). (For additional information on these payment
regulations, we refer readers to the FY 2018 IPPS/LTCH PPS final rule
(82 FR 38321 through 38322).) Section 412.526(c)(3) provides that the
hospital's Medicare allowable net inpatient operating costs for that
period are paid on a reasonable cost basis, subject to that hospital's
ceiling, as determined under Sec. 412.526(c)(1), for that period.
Under Sec. 412.526(c)(1), for each cost reporting period, the ceiling
was determined by multiplying the updated target amount, as defined in
Sec. 412.526(c)(2), for that period by the number of total Medicare
discharges paid during that period. Section 412.526(c)(2)(i) describes
the method for determining the target amount for cost reporting periods
beginning during FY 2015. Section 412.526(c)(2)(ii) specifies that, for
cost reporting periods beginning during fiscal years after FY 2015, the
target amount will equal the hospital's target amount for the previous
cost reporting period updated by the applicable annual rate-of-increase
percentage specified in Sec. 413.40(c)(3) for the subject cost
reporting period (79 FR 50197).
For FY 2026, in accordance with Sec. Sec. 412.22(i) and
412.526(c)(2)(ii) of the regulations, for cost reporting periods
beginning during FY 2026, the proposed update to the target amount for
extended neoplastic disease care hospitals (that is, hospitals
described under Sec. 412.22(i)) is the applicable annual rate-of-
increase percentage specified in Sec. 413.40(c)(3), which is estimated
to be the proposed percentage increase in the proposed 2023-based IPPS
operating market basket (that is, the estimate of the market basket
rate-of-increase). Accordingly, the proposed update to an extended
neoplastic disease care hospital's target amount for FY 2026 is 3.2
percent, which is based on IGI's fourth quarter 2024 forecast.
Furthermore, we are proposing that if more recent data become available
for the FY 2026 IPPS/LTCH PPS final rule, we would use such data, if
appropriate, to calculate the IPPS operating market basket rate of
increase for FY 2026.
B. Critical Access Hospitals (CAHs)
1. Background
Section 1820 of the Act provides for the establishment of Medicare
Rural Hospital Flexibility Programs (MRHFPs), under which individual
States may designate certain facilities as critical access hospitals
(CAHs). Facilities that are so designated and meet the CAH conditions
of participation under 42 CFR part 485, subpart F, will be certified as
CAHs by CMS. Regulations governing payments to CAHs for services to
Medicare beneficiaries are located in 42 CFR part 413.
2. Frontier Community Health Integration Project Demonstration
a. Introduction
The Frontier Community Health Integration Project Demonstration was
originally authorized by section 123 of the Medicare Improvements for
Patients and Providers Act of 2008 (Pub. L. 110-275). The demonstration
has been extended by section 129 of the Consolidated Appropriations
Act, 2021 (Pub. L. 116-260) for an additional 5 years. In this proposed
rule, we are summarizing the status of the demonstration program, and
the ongoing methodologies for implementation and budget neutrality for
the demonstration extension period.
b. Background and Overview
As discussed in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69416
through 69419), section 123 of the Medicare Improvements for Patients
and Providers Act of 2008, as amended by section 3126 of the Affordable
Care Act, authorized a demonstration project to allow eligible entities
to develop and test new models for the delivery of health care services
in eligible counties in order to improve access to and better integrate
the delivery of acute care, extended care and other health care
services to Medicare beneficiaries. The demonstration was titled
``Demonstration Project on Community Health Integration Models in
Certain Rural Counties,'' and commonly known as the Frontier Community
Health Integration Project (FCHIP) Demonstration.
The authorizing statute stated the eligibility criteria for
entities to be able to participate in the demonstration. An eligible
entity, as defined in section 123(d)(1)(B) of Public Law 110-275, as
amended, is a Medicare Rural Hospital Flexibility Program (MRHFP)
grantee under section 1820(g) of the Act (that is, a CAH); and is
located in a State in which at least 65 percent of the counties in the
state are counties that have 6 or less residents per square mile.
The authorizing statute stipulated several other requirements for
the demonstration. In addition, section 123(g)(1)(B) of Public Law 110-
275 required that the demonstration be budget neutral. Specifically,
this provision stated that, in conducting the demonstration project,
the Secretary shall ensure that the aggregate payments made by the
Secretary do not exceed the amount which the Secretary estimates would
have been paid if the demonstration project under the section were not
implemented. Furthermore, section 123(i) of Public Law 110-275 stated
that the Secretary may waive such requirements of titles XVIII and XIX
of the Act as may be necessary and appropriate for the purpose of
carrying out the demonstration project, thus allowing the waiver of
Medicare payment rules encompassed in the demonstration. CMS selected
CAHs to participate in four interventions, under which specific waivers
of Medicare payment rules would allow for enhanced payment for
telehealth, skilled nursing facility/nursing facility beds, ambulance
services, and home health services. These waivers were formulated with
the goal of increasing access to care with no net increase in costs.
Section 123 of Public Law 110-275 initially required a 3-year
period of performance. The FCHIP Demonstration began on August 1, 2016,
and concluded on July 31, 2019 (referred to in this section of the
proposed rule as the ``initial period''). Subsequently, section 129 of
the Consolidated Appropriations Act, 2021 (Pub. L. 116-260) extended
the demonstration by 5 years (referred to in this section of the
proposed rule as the ``extension period''). The Secretary is required
to conduct the demonstration for an additional 5-year period. CAHs
participating in the demonstration project during the extension period
began such participation in their cost reporting year that began on or
after January 1, 2022.
As described in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69416
through 69419), 10 CAHs were selected for participation in the
demonstration initial period. The selected CAHs were located in three
States--Montana, Nevada, and North Dakota--and participated in three of
the four interventions identified in the FY 2025 IPPS/LTCH PPS final
rule. Each CAH was allowed to participate in more than one of the
interventions. None of the selected CAHs were participants in the home
health intervention, which was the fourth intervention.
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through
45328), CMS concluded that the initial period of the FCHIP
Demonstration (covering the performance period of August 1, 2016, to
July 31, 2019) had satisfied the
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budget neutrality requirement described in section 123(g)(1)(B) of
Public Law 110-275. Therefore, CMS did not apply a budget neutrality
payment offset policy for the initial period of the demonstration.
Section 129 of Public Law 116-260, stipulates that only the 10 CAHs
that participated in the initial period of the FCHIP Demonstration are
eligible to participate during the extension period. Among the eligible
CAHs, five have elected to participate in the extension period. The
selected CAHs are located in two States--Montana and North Dakota--and
are implementing three of the four interventions. The eligible CAH
participants elected to change the number of interventions and payment
waivers they would participate in during the extension period. CMS
accepted and approved the CAHs intervention and payment waiver updates.
For the extension period, five CAHs are participants in the telehealth
intervention, three CAHs are participants in the skilled nursing
facility/nursing facility bed intervention, and three CAHs are
participants in the ambulance services intervention. As with the
initial period, each CAH was allowed to participate in more than one of
the interventions during the extension period. None of the selected
CAHs are participants in the home health intervention, which was the
fourth intervention.
c. Intervention Payment and Payment Waivers
As described in the FY 2025IPPS/LTCH PPS final rule (89 FR 69416
through 69419), CMS waived certain Medicare rules for CAHs
participating in the demonstration initial period to allow for
alternative reasonable cost-based payment methods in the three distinct
intervention service areas: telehealth services, ambulance services,
and skilled nursing facility/nursing facility (SNF/NF) beds expansion.
The payments and payment waiver provisions only apply if the CAH is a
participant in the associated intervention. CMS Intervention Payment
and Payment Waivers for the demonstration extension period consist of
the following:
(1) Telehealth Services Intervention Payments
CMS waives section 1834(m)(2)(B) of the Act, which specifies the
facility fee to the originating site for Medicare telehealth services.
CMS modifies the facility fee payment specified under section
1834(m)(2)(B) of the Act to make reasonable cost-based reimbursement to
the participating CAH where the participating CAH serves as the
originating site for a telehealth service furnished to an eligible
telehealth individual, as defined in section 1834(m)(4)(B) of the Act.
CMS reimburses the participating CAH serving as the originating site at
101 percent of its reasonable costs for overhead, salaries and fringe
benefits associated with telehealth services at the participating CAH.
CMS does not fund or provide reimbursement to the participating CAH for
the purchase of new telehealth equipment.
CMS waives section 1834(m)(2)(A) of the Act, which specifies that
the payment for a telehealth service furnished by a distant site
practitioner is the same as it would be if the service had been
furnished in-person. CMS modifies the payment amount specified for
telehealth services under section 1834(m)(2)(A) of the Act to make
reasonable cost-based reimbursement to the participating CAH for
telehealth services furnished by a physician or practitioner located at
distant site that is a participating CAH that is billing for the
physician or practitioner professional services. Whether the
participating CAH has or has not elected Optional Payment Method II for
outpatient services, CMS would pay the participating CAH 101 percent of
reasonable costs for telehealth services when a physician or
practitioner has reassigned their billing rights to the participating
CAH and furnishes telehealth services from the participating CAH as a
distant site practitioner. This means that participating CAHs that are
billing under the Standard Method on behalf of employees who are
physicians or practitioners (as defined in section 1834(m)(4)(D) and
(E) of the Act, respectively) would be eligible to bill for distant
site telehealth services furnished by these physicians and
practitioners. Additionally, CAHs billing under the Optional Method
would be reimbursed based on 101 percent of reasonable costs, rather
than paid based on the Medicare physician fee schedule, for the distant
site telehealth services furnished by physicians and practitioners who
have reassigned their billing rights to the CAH. For distant site
telehealth services furnished by physicians or practitioners who have
not reassigned billing rights to a participating CAH, payment to the
distant site physician or practitioner would continue to be made as
usual under the Medicare physician fee schedule. Except as described
herein, CMS does not waive any other provisions of section 1834(m) of
the Act for purposes of the telehealth services intervention payments,
including the scope of Medicare telehealth services as established
under section 1834(m)(4)(F) of the Act.
(2) Ambulance Services Intervention Payments
CMS waives 42 CFR 413.70(b)(5)(i)(D) and section 1834(l)(8) of the
Act, which provides that payment for ambulance services furnished by a
CAH, or an entity owned and operated by a CAH, is 101 percent of the
reasonable costs of the CAH or the entity in furnishing the ambulance
services, but only if the CAH or the entity is the only provider or
supplier of ambulance services located within a 35-mile drive of the
CAH, excluding ambulance providers or suppliers that are not legally
authorized to furnish ambulance services to transport individuals to or
from the CAH. The participating CAH would be paid 101 percent of
reasonable costs for its ambulance services regardless of whether there
is any provider or supplier of ambulance services located within a 35-
mile drive of the participating CAH or participating CAH-owned and
operated entity. CMS would not make cost-based payment to the
participating CAH for any new capital (for example, vehicles)
associated with ambulance services. This waiver does not modify any
other Medicare rules regarding or affecting the provision of ambulance
services.
(3) SNF/NF Beds Expansion Intervention Payments
CMS waives 42 CFR 485.620(a) and 485.645(a)(2) and section
1820(c)(2)(B)(iii) of the Act which limit CAHs to maintaining no more
than 25 inpatient beds, including beds available for acute inpatient or
swing bed services. CMS waives section 1820(f) of the Act permitting
designating or certifying a facility as a critical access hospital for
which the facility at any time is furnishing inpatient beds which
exceed more than 25 beds. Under this waiver, if the participating CAH
has received swing bed approval from CMS, the participating CAH may
maintain up to ten additional beds (for a total of 35 beds) available
for acute inpatient or swing bed services; however, the participating
CAH may only use these 10 additional beds for nursing facility or
skilled nursing facility level of care. CMS would pay the participating
CAH 101 percent of reasonable costs for its SNF/NF services furnished
in the 10 additional beds.
[[Page 18310]]
d. Budget Neutrality
(1) Budget Neutrality Requirement
In the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through
45328), we finalized a policy to address the budget neutrality
requirement for the demonstration initial period. As explained in the
FY 2022 IPPS/LTCH PPS final rule, we based our selection of CAHs for
participation in the demonstration with the goal of maintaining the
budget neutrality of the demonstration on its own terms meaning that
the demonstration would produce savings from reduced transfers and
admissions to other health care providers, offsetting any increase in
Medicare payments as a result of the demonstration. However, because of
the small size of the demonstration and uncertainty associated with the
projected Medicare utilization and costs, the policy we finalized for
the demonstration initial period of performance in the FY 2022 IPPS/
LTCH PPS final rule provides a contingency plan to ensure that the
budget neutrality requirement in section 123 of Public Law 110-275 is
met.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through
49147), we adopted the same budget neutrality policy contingency plan
used during the demonstration initial period to ensure that the budget
neutrality requirement in section 123 of Public Law 110-275 is met
during the demonstration extension period. If analysis of claims data
for Medicare beneficiaries receiving services at each of the
participating CAHs, as well as from other data sources, including cost
reports for the participating CAHs, shows that increases in Medicare
payments under the demonstration during the 5-year extension period are
not sufficiently offset by reductions elsewhere, we would recoup the
additional expenditures attributable to the demonstration through a
reduction in payments to all CAHs nationwide.
As explained in the FY 2023 IPPS/LTCH PPS final rule, because of
the small scale of the demonstration, we indicated that we did not
believe it would be feasible to implement budget neutrality for the
demonstration extension period by reducing payments to only the
participating CAHs. Therefore, in the event that this demonstration
extension period is found to result in aggregate payments in excess of
the amount that would have been paid if this demonstration extension
period were not implemented, CMS policy is to comply with the budget
neutrality requirement finalized in the FY 2023 IPPS/LTCH PPS final
rule, by reducing payments to all CAHs, not just those participating in
the demonstration extension period.
In the FY 2023 IPPS/LTCH PPS final rule (87 FR 49144 through
49147), we stated that we believe it is appropriate to make any payment
reductions across all CAHs because the FCHIP Demonstration was
specifically designed to test innovations that affect delivery of
services by the CAH provider category. We explained our belief that the
language of the statutory budget neutrality requirement at section
123(g)(1)(B) of Public Law 110-275 permits the agency to implement the
budget neutrality provision in this manner. The statutory language
merely refers to ensuring that aggregate payments made by the Secretary
do not exceed the amount which the Secretary estimates would have been
paid if the demonstration project was not implemented and does not
identify the range across which aggregate payments must be held equal.
In the FY 2023 IPPS/LTCH PPS final rule, we finalized a policy that
in the event the demonstration extension period is found not to have
been budget neutral, any excess costs would be recouped within one
fiscal year. We explained our belief that this policy is a more
efficient timeframe for the government to conclude the demonstration
operational requirements (such as analyzing claims data, cost report
data or other data sources) to adjudicate the budget neutrality payment
recoupment process due to any excess cost that occurred as result of
the demonstration extension period.
(2) FCHIP Budget Neutrality Methodology and Analytical Approach
As explained in the FY 2022 IPPS/LTCH PPS final rule, we finalized
a policy to address the demonstration budget neutrality methodology and
analytical approach for the initial period of the demonstration. In the
FY 2023 IPPS/LTCH PPS final rule, we finalized a policy to adopt the
budget neutrality methodology and analytical approach used during the
demonstration initial period to ensure budget neutrality for the
extension period. The analysis of budget neutrality during the initial
period of the demonstration identified both the costs related to
providing the intervention services under the FCHIP Demonstration and
any potential downstream effects of the intervention-related services,
including any savings that may have accrued.
The budget neutrality analytical approach for the demonstration
initial period incorporated two major data components: (1) Medicare
cost reports; and (2) Medicare administrative claims. As described in
the FY 2022 IPPS/LTCH PPS final rule (86 FR 45323 through 45328), CMS
computed the cost of the demonstration for each fiscal year of the
demonstration initial period using Medicare cost reports for the
participating CAHs, and Medicare administrative claims and enrollment
data for beneficiaries who received demonstration intervention
services.
In addition, in order to capture the full impact of the
interventions, CMS developed a statistical modeling, Difference-in-
Difference (DiD) regression analysis to estimate demonstration
expenditures and compute the impact of expenditures on the intervention
services by comparing cost data for the demonstration and non-
demonstration groups using Medicare administrative claims across the
demonstration period of performance under the initial period of the
demonstration. The DiD regression analysis would compare the direct
cost and potential downstream effects of intervention services,
including any savings that may have accrued, during the baseline and
performance period for both the demonstration and comparison groups.
Second, the Medicare administrative claims analysis would be
reconciled using data obtained from auditing the participating CAHs'
Medicare cost reports. We would estimate the costs of the demonstration
using ``as submitted'' cost reports for each hospital's financial
fiscal year participation within each of the demonstration extension
period performance years. Each CAH has its own Medicare cost report end
date applicable to the 5-year period of performance for the
demonstration extension period. The cost report is structured to gather
costs, revenues and statistical data on the provider's financial fiscal
period. As a result, we finalized a policy in the FY 2023 IPPS/LTCH PPS
final rule that we would determine the final budget neutrality results
for the demonstration extension once complete data is available for
each CAH for the demonstration extension period.
e. Policies for Implementing the 5-Year Extension and Provisions
Authorized by Section 129 of the Consolidated Appropriations Act, 2021
(Pub. L. 116-260)
As stated in the FY 2025 IPPS/LTCH PPS final rule (89 FR 69416
through 69419), our policy for implementing the 5-year extension period
for section 129 of Public Law 116-260 follows same budget neutrality
methodology and analytical approach as the
[[Page 18311]]
demonstration initial period methodology. While we expect to use the
same methodology that was used to assess the budget neutrality of the
FCHIP Demonstration during initial period of the demonstration to
assess the financial impact of the demonstration during this extension
period, upon receiving data for the extension period, we may update
and/or modify the FCHIP budget neutrality methodology and analytical
approach to ensure that the full impact of the demonstration is
appropriately captured.
f. Total Budget Neutrality Offset Amount for FY 2026
At this time, for the FY 2026 IPPS/LTCH PPS proposed rule, while
this discussion represents our anticipated approach to assessing the
financial impact of the demonstration extension period based on upon
receiving data for the full demonstration extension period, we may
update and/or modify the FCHIP Demonstration budget neutrality
methodology and analytical approach to ensure that the full impact of
the demonstration is appropriately captured.
Therefore, we do not propose to apply a budget neutrality payment
offset to payments to CAHs in FY 2026. This policy would have no impact
for any national payment system for FY 2026.
IX. Proposed Changes to the Long-Term Care Hospital Prospective Payment
System (LTCH PPS) for FY 2026
A. Background of the LTCH PPS
1. Legislative and Regulatory Authority
Section 123 of the Medicare, Medicaid, and SCHIP (State Children's
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA)
(Pub. L. 106-113), as amended by section 307(b) of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554), provides for payment for both the operating
and capital-related costs of hospital inpatient stays in long-term care
hospitals (LTCHs) under Medicare Part A based on prospectively set
rates. The Medicare prospective payment system (PPS) for LTCHs applies
to hospitals that are described in section 1886(d)(1)(B)(iv) of the
Act, effective for cost reporting periods beginning on or after October
1, 2002.
Section 1886(d)(1)(B)(iv)(I) of the Act originally defined an LTCH
as a hospital that has an average inpatient length of stay (as
determined by the Secretary) of greater than 25 days.
Section 1886(d)(1)(B)(iv)(II) of the Act also provided an
alternative definition of LTCHs (``subclause II'' LTCHs). However,
section 15008 of the 21st Century Cures Act (Pub. L. 114-255) amended
section 1886 of the Act to exclude former ``subclause II'' LTCHs from
being paid under the LTCH PPS and created a new category of IPPS-
excluded hospitals, which we refer to as ``extended neoplastic disease
care hospitals,'' to be paid as hospitals that were formally classified
as ``subclause (II)'' LTCHs (82 FR 38298).
Section 123 of the BBRA requires the PPS for LTCHs to be a ``per
discharge'' system with a diagnosis-related group (DRG) based patient
classification system that reflects the differences in patient resource
use and costs in LTCHs.
Section 307(b)(1) of the BIPA, among other things, mandates that
the Secretary shall examine, and may provide for, adjustments to
payments under the LTCH PPS, including adjustments to DRG weights, area
wage adjustments, geographic reclassification, outliers, updates, and a
disproportionate share adjustment.
In the August 30, 2002, Federal Register (67 FR 55954), we issued a
final rule that implemented the LTCH PPS authorized under the BBRA and
BIPA. For the initial implementation of the LTCH PPS (FYs 2003 through
2007), the system used information from LTCH patient records to
classify patients into distinct long-term care-diagnosis-related groups
(LTCDRGs) based on clinical characteristics and expected resource
needs. Beginning in FY 2008, we adopted the Medicare severity-long-term
care-diagnosis related groups (MS-LTC-DRGs) as the patient
classification system used under the LTCH PPS. Payments are calculated
for each MS-LTC-DRG and provisions are made for appropriate payment
adjustments. Payment rates under the LTCH PPS are updated annually and
published in the Federal Register.
The LTCH PPS replaced the reasonable cost-based payment system
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
(Pub. L. 97-248) for payments for inpatient services provided by an
LTCH with a cost reporting period beginning on or after October 1,
2002. (The regulations implementing the TEFRA reasonable-cost-based
payment provisions are located at 42 CFR part 413.) With the
implementation of the PPS for acute care hospitals authorized by the
Social Security Amendments of 1983 (Pub. L. 98-21), which added section
1886(d) to the Act, certain hospitals, including LTCHs, were excluded
from the PPS for acute care hospitals and paid their reasonable costs
for inpatient services subject to a per discharge limitation or target
amount under the TEFRA system. For each cost reporting period, a
hospital specific ceiling on payments was determined by multiplying the
hospital's updated target amount by the number of total current year
Medicare discharges. (Generally, in this section of the preamble of
this proposed rule, when we refer to discharges, we describe Medicare
discharges.) The August 30, 2002, final rule further details the
payment policy under the TEFRA system (67 FR 55954).
In the August 30, 2002, final rule, we provided for a 5-year
transition period from payments under the TEFRA system to payments
under the LTCH PPS. During this 5-year transition period, an LTCH's
total payment under the PPS was based on an increasing percentage of
the Federal rate with a corresponding decrease in the percentage of the
LTCH PPS payment that is based on reasonable cost concepts, unless an
LTCH made a one-time election to be paid based on 100 percent of the
Federal rate. Beginning with LTCHs' cost reporting periods beginning on
or after October 1, 2006, total LTCH PPS payments are based on 100
percent of the Federal rate.
In addition, in the August 30, 2002, final rule, we presented an
in-depth discussion of the LTCH PPS, including the patient
classification system, relative weights, payment rates, additional
payments, and the budget neutrality requirements mandated by section
123 of the BBRA. The same final rule that established regulations for
the LTCH PPS under 42 CFR part 412, subpart O, also contained LTCH
provisions related to covered inpatient services, limitation on charges
to beneficiaries, medical review requirements, furnishing of inpatient
hospital services directly or under arrangement, and reporting and
recordkeeping requirements. We refer readers to the August 30, 2002,
final rule for a comprehensive discussion of the research and data that
supported the establishment of the LTCH PPS (67 FR 55954).
In the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601 through
49623), we implemented the provisions of the Pathway for Sustainable
Growth Rate (SGR) Reform Act of 2013 (Pub. L. 113-67), which mandated
the application of the ``site neutral'' payment rate under the LTCH PPS
for discharges that do not meet the statutory criteria for exclusion
beginning in FY 2016. For cost reporting periods beginning on or after
October 1,
[[Page 18312]]
2015, discharges that do not meet certain statutory criteria for
exclusion are paid based on the site neutral payment rate. Discharges
that do meet the statutory criteria continue to receive payment based
on the LTCH PPS standard Federal payment rate. For more information on
the statutory requirements of the Pathway for SGR Reform Act of 2013,
we refer readers to the FY 2016 IPPS/LTCH PPS final rule (80 FR 49601
through 49623) and the FY 2017 IPPS/LTCH PPS final rule (81 FR 57068
through 57075).
In the FY 2018 IPPS/LTCH PPS final rule, we implemented several
provisions of the 21st Century Cures Act (``the Cures Act'') (Pub. L.
114-255) that affected the LTCH PPS. (For more information on these
provisions, we refer readers to (82 FR 38299).)
In the FY 2019 IPPS/LTCH PPS final rule (83 FR 41529), we made
conforming changes to our regulations to implement the provisions of
section 51005 of the Bipartisan Budget Act of 2018 (Pub. L. 115-123),
which extends the transitional blended payment rate for site neutral
payment rate cases for an additional 2 years. We refer readers to
section VII.C. of the preamble of the FY 2019 IPPS/LTCH PPS final rule
for a discussion of our final policy. In addition, in the FY 2019 IPPS/
LTCH PPS final rule, we removed the 25-percent threshold policy under
42 CFR 412.538, which was a payment adjustment that was applied to
payments for Medicare patient LTCH discharges when the number of such
patients originating from any single referring hospital was in excess
of the applicable threshold for given cost reporting period.
In the FY 2020 IPPS/LTCH PPS final rule (84 FR 42439), we further
revised our regulations to implement the provisions of the Pathway for
SGR Reform Act of 2013 (Pub. L. 113-67) that relate to the payment
adjustment for discharges from LTCHs that do not maintain the requisite
discharge payment percentage and the process by which such LTCHs may
have the payment adjustment discontinued.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
Under the regulations at Sec. 412.23(e)(1), to qualify to be paid
under the LTCH PPS, a hospital must have a provider agreement with
Medicare. Furthermore, Sec. 412.23(e)(2)(i), which implements section
1886(d)(1)(B)(iv) of the Act, requires that a hospital have an average
Medicare inpatient length of stay of greater than 25 days to be paid
under the LTCH PPS. In accordance with section 1206(a)(3) of the
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), as amended by
section 15007 of Public Law 114-255, we amended our regulations to
specify that Medicare Advantage plans' and site neutral payment rate
discharges are excluded from the calculation of the average length of
stay for all LTCHs, for discharges occurring in cost reporting period
beginning on or after October 1, 2015.
b. Hospitals Excluded From the LTCH PPS
The following hospitals are paid under special payment provisions,
as described in Sec. 412.22(c) and, therefore, are not subject to the
LTCH PPS rules:
Veterans Administration hospitals.
Hospitals that are reimbursed under State cost control
systems approved under 42 CFR part 403.
Hospitals that are reimbursed in accordance with
demonstration projects authorized under section 402(a) of the Social
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1),
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b1 (note)) (Statewide-all payer systems, subject to
the rate-of increase test at section 1814(b) of the Act), or section
3021 of the Patient Protection and Affordable Care Act (Pub. L. 111-
148) (42 U.S.C. 1315a).
Nonparticipating hospitals furnishing emergency services
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
In the August 30, 2002, final rule, we presented an in-depth
discussion of beneficiary liability under the LTCH PPS (67 FR 55974
through 55975). This discussion was further clarified in the RY 2005
LTCH PPS final rule (69 FR 25676). In keeping with those discussions,
if the Medicare payment to the LTCH is the full LTC-DRG payment amount,
consistent with other established hospital prospective payment systems,
Sec. 412.507 currently provides that an LTCH may not bill a Medicare
beneficiary for more than the deductible and coinsurance amounts as
specified under Sec. Sec. 409.82, 409.83, and 409.87, and for items
and services specified under Sec. 489.30(a). However, under the LTCH
PPS, Medicare will only pay for services furnished during the days for
which the beneficiary has coverage until the short-stay outlier (SSO)
threshold is exceeded. If the Medicare payment was for a SSO case (in
accordance with Sec. 412.529), and that payment was less than the full
LTC-DRG payment amount because the beneficiary had insufficient
coverage as a result of the remaining Medicare days, the LTCH also is
currently permitted to charge the beneficiary for services delivered on
those uncovered days (in accordance with Sec. 412.507). In the FY 2016
IPPS/LTCH PPS final rule (80 FR 49623), we amended our regulations to
expressly limit the charges that may be imposed upon beneficiaries
whose LTCHs' discharges are paid at the site neutral payment rate under
the LTCH PPS. In the FY 2017 IPPS/LTCH PPS final rule (81 FR 57102), we
amended the regulations under Sec. 412.507 to clarify our existing
policy that blended payments made to an LTCH during its transitional
period (that is, an LTCH's payment for discharges occurring in cost
reporting periods beginning in FYs 2016 through 2019) are considered to
be site neutral payment rate payments.
B. Medicare Severity Long-Term Care Diagnosis-Related Group (MS-LTC-
DRG) Classifications and Relative Weights for FY 2026
1. Background
Section 123 of the BBRA required that the Secretary implement a PPS
for LTCHs to replace the cost-based payment system under TEFRA. Section
307(b)(1) of the BIPA modified the requirements of section 123 of the
BBRA by requiring that the Secretary examine the feasibility and the
impact of basing payment under the LTCH PPS on the use of existing (or
refined) hospital DRGs that have been modified to account for different
resource use of LTCH patients.
Under both the IPPS and the LTCH PPS, the DRG-based classification
system uses information on the claims for inpatient discharges to
classify patients into distinct groups (for example, DRGs) based on
clinical characteristics and expected resource needs. When the LTCH PPS
was implemented for cost reporting periods beginning on or after
October 1, 2002, we adopted the same DRG patient classification system
utilized at that time under the IPPS. We referred to this patient
classification system as the ``long-term care diagnosis-related groups
(LTC-DRGs).'' As part of our efforts to better recognize severity of
illness among patients, in the FY 2008 IPPS final rule with comment
period (72 FR 47130), we adopted the MS-DRGs and the Medicare severity
long-term care diagnosis-related groups (MS-LTC-DRGs) under the IPPS
and the LTCH PPS, respectively, effective beginning October 1, 2007 (FY
2008). For a full description of the development, implementation, and
rationale for the use of the MS-DRGs and MS-LTC-
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DRGs, we refer readers to the FY 2008 IPPS final rule with comment
period (72 FR 47141 through 47175 and 47277 through 47299). (We note
that, in that same final rule, we revised the regulations at Sec.
412.503 to specify that for LTCH discharges occurring on or after
October 1, 2007, when applying the provisions of 42 CFR part 412,
subpart O, applicable to LTCHs for policy descriptions and payment
calculations, all references to LTC-DRGs would be considered a
reference to MS-LTC-DRGs. For the remainder of this section, we present
the discussion in terms of the current MS-LTC-DRG patient
classification system unless specifically referring to the previous
LTC-DRG patient classification system that was in effect before October
1, 2007.)
Consistent with section 123 of the BBRA, as amended by section
307(b)(1) of the BIPA, and Sec. 412.515 of the regulations, we use
information derived from LTCH PPS patient records to classify LTCH
discharges into distinct MS-LTC-DRGs based on clinical characteristics
and estimated resource needs. As noted previously, we adopted the same
DRG patient classification system utilized at that time under the IPPS.
The MS-DRG classifications are updated annually, which has resulted in
the number of MS-DRGs changing over time. For FY 2026, there would be
774 MS-DRG, and by extension, MS-LTC-DRG, groupings based on the
proposed changes, as discussed in section II.E. of the preamble of this
proposed rule.
Although the patient classification system used under both the LTCH
PPS and the IPPS are the same, the relative weights are different. The
established relative weight methodology and data used under the LTCH
PPS result in relative weights under the LTCH PPS that reflect the
differences in patient resource use of LTCH patients, consistent with
section 123(a)(1) of the BBRA. That is, we assign an appropriate weight
to the MS-LTC-DRGs to account for the differences in resource use by
patients exhibiting the case complexity and multiple medical problems
characteristic of LTCH patients.
2. Patient Classifications Into MS-LTC-DRGs
a. Background
The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under
the LTCH PPS) are based on the CMS DRG structure. As noted previously
in this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs
although they are structurally identical to the MS-DRGs used under the
IPPS.
The MS-DRGs are organized into 25 major diagnostic categories
(MDCs), most of which are based on a particular organ system of the
body; the remainder involve multiple organ systems (such as MDC 22,
Burns). Within most MDCs, cases are then divided into surgical DRGs and
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy
that orders operating room (O.R.) procedures or groups of O.R.
procedures by resource intensity. The GROUPER software program does not
recognize all ICD-10-PCS procedure codes as procedures affecting DRG
assignment. That is, procedures that are not surgical (for example,
EKGs) or are minor surgical procedures (for example, a biopsy of skin
and subcutaneous tissue (procedure code 0JBH3ZX)) do not affect the MS-
LTC-DRG assignment based on their presence on the claim.
Generally, under the LTCH PPS, a Medicare payment is made at a
predetermined specific rate for each discharge that varies based on the
MS-LTC-DRG to which a beneficiary's discharge is assigned. Cases are
classified into MS-LTC-DRGs for payment based on the following six data
elements:
Principal diagnosis.
Additional or secondary diagnoses.
Surgical procedures.
Age.
Sex.
Discharge status of the patient.
Currently, for claims submitted using the version ASC X12 5010
standard, up to 25 diagnosis codes and 25 procedure codes are
considered for an MS-DRG assignment. This includes one principal
diagnosis and up to 24 secondary diagnoses for severity of illness
determinations. (For additional information on the processing of up to
25 diagnosis codes and 25 procedure codes on hospital inpatient claims,
we refer readers to section II.G.11.c. of the preamble of the FY 2011
IPPS/LTCH PPS final rule (75 FR 50127).)
Under the HIPAA transactions and code sets regulations at 45 CFR
parts 160 and 162, covered entities (45 CFR 160.103) must comply with
the adopted transaction standards and operating rules specified in
subparts I through S of part 162. Among other requirements, on or after
January 1, 2012, covered entities are required to use the ASC X12
Standards for Electronic Data Interchange Technical Report Type 3--
Health Care Claim: Institutional (837), May 2006, ASC X12N/005010X223,
and Type 1 Errata to Health Care Claim: Institutional (837) ASC X12
Standards for Electronic Data Interchange Technical Report Type 3,
October 2007, ASC X12N/005010X233A1 for the health care claims or
equivalent encounter information transaction (45 CFR 162.1102(c)).
HIPAA requires covered entities to use the applicable medical data
code sets when conducting HIPAA transactions (45 CFR 162.1000).
Currently, upon the discharge of the patient, the LTCH must assign
appropriate diagnosis and procedure codes from the International
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) for diagnosis coding and the International Classification of
Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) for
inpatient hospital procedure coding, both of which were required to be
implemented October 1, 2015 (45 CFR 162.1002(c)(2) and (3)). For
additional information on the implementation of the ICD-10 coding
system, we refer readers to section II.F.1. of the preamble of the FY
2017 IPPS/LTCH PPS final rule (81 FR 56787 through 56790) and section
II.E.1. of the preamble of this proposed rule. Additional coding
instructions and examples are published in the AHA's Coding Clinic for
ICD-10-CM/PCS.
To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base
DRGs were subdivided according to the presence of specific secondary
diagnoses designated as complications or comorbidities (CCs) into one,
two, or three levels of severity, depending on the impact of the CCs on
resources used for those cases. Specifically, there are sets of MS-DRGs
that are split into 2 or 3 subgroups based on the presence or absence
of a CC or a major complication or comorbidity (MCC). We refer readers
to section II.D. of the preamble of the FY 2008 IPPS final rule with
comment period for a detailed discussion about the creation of MS-DRGs
based on severity of illness levels (72 FR 47141 through 47175).
Medicare Administrative Contractors (MACs) enter the clinical and
demographic information submitted by LTCHs into their claims processing
systems and subject this information to a series of automated screening
processes called the Medicare Code Editor (MCE). These screens are
designed to identify cases that require further review before
assignment into a MS-LTC-DRG can be made. During this process, certain
types of cases are selected for further explanation (74 FR 43949).
After screening through the MCE, each claim is classified into the
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the
basis of diagnosis and procedure codes and other demographic
[[Page 18314]]
information (age, sex, and discharge status). The GROUPER software used
under the LTCH PPS is the same GROUPER software program used under the
IPPS. Following the MS-LTC-DRG assignment, the MAC determines the
prospective payment amount by using the Medicare PRICER program, which
accounts for hospital-specific adjustments. Under the LTCH PPS, we
provide an opportunity for LTCHs to review the MS-LTC-DRG assignments
made by the MAC and to submit additional information within a specified
timeframe as provided in Sec. 412.513(c).
The GROUPER software is used both to classify past cases to measure
relative hospital resource consumption to establish the MS-LTC-DRG
relative weights and to classify current cases for purposes of
determining payment. The records for all Medicare hospital inpatient
discharges are maintained in the MedPAR file. The data in this file are
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during
our annual update under both the IPPS (Sec. 412.60(e)) and the LTCH
PPS (Sec. 412.517), respectively.
b. Proposed Changes to the MS-LTC-DRGs for FY 2026
As specified by our regulations at Sec. 412.517(a), which require
that the MS-LTC-DRG classifications and relative weights be updated
annually, and consistent with our historical practice of using the same
patient classification system under the LTCH PPS as is used under the
IPPS, in this proposed rule, we are proposing to update the MS-LTC-DRG
classifications effective October 1, 2025, through September 30, 2026
(FY 2026), consistent with the proposed changes to specific MS-DRG
classifications presented in section II.F. of the preamble of this
proposed rule. Accordingly, the proposed MS-LTC-DRGs for FY 2026 are
the same as the MS-DRGs being proposed for use under the IPPS for FY
2026. In addition, because the proposed MS-LTC-DRGs for FY 2026 are the
same as the proposed MS-DRGs for FY 2026, the other proposed changes
that affect MS-DRG (and by extension MS-LTC-DRG) assignments under
proposed GROUPER Version 43, as discussed in section II.E. of the
preamble of this proposed rule, including the proposed changes to the
MCE software and the ICD-10-CM/PCS coding system, are also applicable
under the LTCH PPS for FY 2026.
3. Proposed Development of the FY 2026 MS-LTC-DRG Relative Weights
a. General Overview of the MS-LTC-DRG Relative Weights
One of the primary goals for the implementation of the LTCH PPS is
to pay each LTCH an appropriate amount for the efficient delivery of
medical care to Medicare patients. The system must be able to account
adequately for each LTCH's case-mix to ensure both fair distribution of
Medicare payments and access to adequate care for those Medicare
patients whose care is costlier (67 FR 55984). To accomplish these
goals, we have annually adjusted the LTCH PPS standard Federal
prospective payment rate by the applicable relative weight in
determining payment to LTCHs for each case. Under the LTCH PPS,
relative weights for each MS-LTC-DRG are a primary element used to
account for the variations in cost per discharge and resource
utilization among the payment groups (Sec. 412.515). To ensure that
Medicare patients classified to each MS-LTC-DRG have access to an
appropriate level of services and to encourage efficiency, we calculate
a relative weight for each MS-LTC-DRG that represents the resources
needed by an average inpatient LTCH case in that MS-LTC-DRG. For
example, cases in an MS-LTC-DRG with a relative weight of 2 would, on
average, cost twice as much to treat as cases in an MS-LTC-DRG with a
relative weight of 1.
The established methodology to develop the MS-LTC-DRG relative
weights is generally consistent with the methodology established when
the LTCH PPS was implemented in the August 30, 2002, LTCH PPS final
rule (67 FR 55989 through 55991). However, there have been some
modifications of our historical procedures for assigning relative
weights in cases of zero volume or nonmonotonicity or both resulting
from the adoption of the MS-LTC-DRGs. We also made a modification in
conjunction with the implementation of the dual rate LTCH PPS payment
structure beginning in FY 2016 to use LTCH claims data from only LTCH
PPS standard Federal payment rate cases (or LTCH PPS cases that would
have qualified for payment under the LTCH PPS standard Federal payment
rate if the dual rate LTCH PPS payment structure had been in effect at
the time of the discharge). We also adopted, beginning in FY 2023, a
10-percent cap policy on the reduction in a MS-LTC-DRG's relative
weight in a given year. (For details on the modifications to our
historical procedures for assigning relative weights in cases of zero
volume and nonmonotonicity or both, we refer readers to the FY 2008
IPPS final rule with comment period (72 FR 47289 through 47295) and the
FY 2009 IPPS final rule (73 FR 48542 through 48550)). For details on
the change in our historical methodology to use LTCH claims data only
from LTCH PPS standard Federal payment rate cases (or cases that would
have qualified for such payment had the LTCH PPS dual payment rate
structure been in effect at the time) to determine the MS-LTC-DRG
relative weights, we refer readers to the FY 2016 IPPS/LTCH PPS final
rule (80 FR 49614 through 49617). For details on our adoption of the
10-percent cap policy, we refer readers to the FY 2023 IPPS/LTCH PPS
final rule (87 FR 49152 through 49154).)
For purposes of determining the MS-LTC-DRG relative weights, under
our historical methodology, there are three different categories of MS-
LTC-DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-
LTC-DRGs with at least 25 applicable LTCH cases in the data used to
calculate the relative weight, which are each assigned a unique
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that
contain between 1 and 24 applicable LTCH cases that are grouped into
quintiles (as described later in this section in Step 3 of our proposed
methodology) and assigned the relative weight of the quintile); and (3)
no-volume MS-LTC-DRGs that are cross-walked to other MS-LTC-DRGs based
on the clinical similarities and assigned the relative weight of the
cross-walked MS-LTC-DRG (as described later in this section in Step 8
of our proposed methodology). For FY 2026, we are proposing to continue
to use applicable LTCH cases to establish the same volume-based
categories to calculate the FY 2026 MS-LTC-DRG relative weights.
b. Development of the MS-LTC-DRG Relative Weights for FY 2026
In this section, we present our proposed methodology for
determining the MS-LTC-DRG relative weights for FY 2026. We first list
and provide a brief description of our proposed steps for determining
the FY 2026 MS-LTC-DRG relative weights. Later in this section, we
discuss in greater detail each step. We note that, as we did in FY
2025, we are proposing to use our historical relative weight
methodology as described in the FY 2021 IPPS/LTCH PPS final rule (85 FR
58898 through 58907), subject to a ten percent cap as described in the
FY 2023 IPPS/LTCH PPS final rule (87 FR 49162).
Step 1--Prepare data for MS-LTC-DRG relative weight
calculation. In this
[[Page 18315]]
step, we select and group the applicable claims data used in the
development of the proposed MS-LTC-DRG relative weights.