DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services 42 CFR Part 412 [CMS
- 16 27
- P ] RIN 0938
- A S 47 Medicare Program; Inpatient Psychiatric Facilities Prospective Payment System
- Update for Fiscal Year Beginning October 1, 201 5 (FY 201 6 ) AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION : Proposed r ule

. SUMMARY: This proposed rule would update the prospective payment rates for Medicare inpatient hospital services provided by inpatient psychiatric facilities (IPFs) ( which are freestanding IPFs and psychiatric units of an acute care hospital or critical access hospital)

. These changes would be applicable to IPF discharges occurring during the fiscal year (FY) beginning October 1, 201 5 through September 30, 201 6 (FY 2016)

. This proposed rule also
propose s: a new IPF

- specific market basket; to update the IPF labor

- related share; a transition to

new Core Based Statistical Are a ( CBSA ) designations in the FY 2016 IPF P rospective Payment System (P PS ) wage index; to phase out the rural adjustment for IPF providers whose status changes from rural to urban as a result of the proposed wage index CBSA changes; and new quality measures and reporting requirements under the IPF quality reporting program. This proposed rule also reminds IPFs of the October 1, 2015 implementation of the International Classification of Diseases, 10 th Revision, Clinical Modification (ICD

- 10

- CM) , and update s providers on the status of IPF PPS refinements. DATES : To be assured consideration, comments must be received at one of the addressesCMS

- 1627

- P 2

provided below, no later than 5 p.m. on June 23, 2015

. ADDRESSES: In commenting, please refer to file code CMS

- 1627

- P

. Because of staff and resource limitations, we cannot accept comments by facsimile (FAX) transmission. You may submit comments in one of four ways (please choose only one of the ways listed):
1. Electronically . You may submit electronic comments on this regulation to http://www.regulations.gov . Follow the "Submit a comment" instructions.
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

- 1627

- P, P.O. Box 8010 , Baltimore, MD 21244

- 1850

. Please allow sufficient time for mailed comments to be received before the close of the comment period.
3. By express or overnight mail . You may send written comments to the following addr ess ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS

- 1627

- P, Mail Stop C4

- 26

- 05, 7500 Security Boulevard, Baltimore, MD 21244

- 1850.CMS

- 1627

- P 3

4. By hand or courier

. Alternatively, you may deliver (by hand or courier) your written comments ONLY to the following addresses prior to the close of the comment period : a. For delivery in Washington, DC

-- Centers for Medicare & Medicaid Services, Department of Health and Human Services,
Room 445

- G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 20201 (Because access to the interior of the Hubert H. Humphrey Building is not readily available to persons without Federal government identification, commenters are encouraged to leave their comments in the CMS drop slots located in the main lobby of the building. A stamp

in clock is available for persons wishing to retain a proof of filing by stamping in and retaining an extra copy of the comments being filed.) b. For delivery in Baltimore, MD

-- Centers for Medicare & Medicaid Services, Department of Health and Human Services, 7500 Security Boulevard, Baltimore, MD 21244

- 1850. If you intend to deliver your comments to the Baltimore address, call telephone numbe r (410) 786

- 4492 in advance to schedule your arrival with one of our staff members.
Comments erroneously mailed to the addresses indicated as appropriate for hand or courier delivery may be delayed and received after the comment period.CMS

- 1627

- P 4

For information on viewing public comments, see the beginning of the

" SUPPLEMENTARY INFORMATION " section. FOR FURTHER INFORMATION CONTACT: Katherine Lucas or Jana Lindquist, (410) 786

- 7723 , for general information. Hudson Osgood , (410) 786

- 7 897 or Bridget Dickensheets, (410) 786

- 8670, for information regarding the market basket and labor

- re lated share

. Theresa Bean, (410) 786

- 2287, for information regarding the regulatory impact analysis. Rebecca Kliman, (410) 786

- 9723 , or Jeffrey Buck, (410)786

- 0407 , for information regarding the inpatient psychiatric facility quality reporting program. SUPPLEMENTARY INFORMATION: Availability of Certain Tables Exclusively Through the Internet on the CMS Web s ite In the past, tables setting forth the Wage Index for Urban Areas Based on CBSA Labor Market Areas and the Wage Index Based on CBSA Labor Market Areas for Rural Areas were published in the Federal Register as an Addendum to the annual PPS rulemaking (that i s, the PPS proposed and final rules or, when applicable, the current update notice). However, beginning in FY 2015, these wage index tables are no longer published in the Federal Register

. Instead, these tables will be available exclusively through the I nternet. The wage index tables for this proposed rule are available exclusively thro ugh the Internet on the CMS web site at http://www.cms.gov/Medicare/Medic are - Fee

- for

- Service

- Payment/IPFPPS/WageIndex.html

. To assist readers in referencing sections contained in this document, we are providing the following table of contents. I. Executive Summary A. PurposeCMS

- 1627

- P 5

B. Summary of the Major Provisions C. Summary of Impacts II. Background A. Overview of the Legislative Requirements of the IPF PPS B. Overview of the IPF PPS C. Annual Requirements for Updating the IPF PPS III. Provisions of the Proposed Rule
A. Proposed Market Basket for the IPF PPS
1. Background
2. Overview of the Proposed 2012

- Based IPF Market Basket
3. Creating an IPF

- specific Market Basket

a. Development of Cost Categories and Weights i. Medicare Cost Reports ii. Final Major Cost Category Computation iii. Derivation of the Detailed Operating Cost Weights iv. Derivation of the Detailed Capital Cost Weights v. Proposed 2012

- based IPF Market Basket Cost Categories and Weights b. Selection of Price Proxies i. Price Proxies for the Operating Portion of the Proposed 2012

- Based IPF Market Basket ii. Price Proxies for the Capital Portion of the Proposed 2012

- Based IPF Market Basket iii. Summary of all Price Proxies of the Proposed 2012

- Based IPF Market Basket
4. Proposed FY 2016 Market Basket Update
5. Proposed Productivity AdjustmentCMS

- 1627

- P 6

6. Proposed Labor

- related Share B. Proposed Updates to the IPF PPS Rates for FY Beginning October 1, 2016 1. Determining the Standardized Budget

- Neutral Federal Per Diem Base Rate 2. Proposed Update of the Federal Per Diem Base Rate and Electroconvulsive Therapy Rate
C. Pro posed Updates to the IPF PPS Patient

- Level Adjustment Factors 1. Overview of the IPF PPS Adjustment Factors
2 . IPF

- PPS Patient

- Level Adjustments
a. MS

- DRG Assignment b. Payment for Comorbid Conditions
3. Patient Age Adjustments
4 . Variable Per Diem Adjustments
D. Proposed Updates to the IPF PPS Facility

- Level Adjustments 1. Proposed Wage Index Adjustment a. Background b. Proposed Wage Index for FY 201 6

c . OMB Bulletins and Proposed Transitional Wage Index d . Adjustment for Rural Location and Proposal to Phase Out the Rural Adjustment for IPFs Losing Their Rural Adjustment Due to CBSA Changes e. Budget neutrality adjustment
2 . Teaching Adjustment
3 . Cost of Living Adjustm ent for IPFs Located in Alaska and Hawaii
4 . Adjustment for IPFs with a Qualifying Emergency Department (ED)CMS

- 1627

- P 7

E. Other Payment Adjustments and Policies 1. Outlier Payment Overview
2

. Proposed Update to the Outlier Fixed Dollar Loss Threshold Amount
3

. Proposed Update to IPF Cost

- to

- Charge Ratio Ceiling s IV. Update s o n Other Payment Policy Issues A. Implementation of ICD

- 10

- CM and ICD

- 10

- PCS B. Update on IPF PPS Refinements V. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program A. Background 1. Statutory Authority 2. Covered Entities 3. Considera tions in Selecting Quality Measures B. Retention of IPFQR Program Measures Adopted in Previous Payment Determinations C. Proposed Removal of Quality Measure from the IPFQR Program Measure Set D. New Quality Measures Proposed for the FY 2018 Payment Dete rmination and Subsequent
Years 1. TOB

- 3 Tobacco Use Treatment Provided or Offered at Discharge and the subset measure
TOB

- 3a Tobacco Use Treatment at Discharge
2. SUB

- 2 Alcohol Use Brief Intervention Provided or Offered and SUB

- 2a Alcohol Use Brief Intervention
3. Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care)
4. Timely Transmission of Transition Record (Discharges from an Inpatient Facility toCMS

- 1627

- P 8

Home/Self Care or Any Other Site of Care)
5. Screening for Metabolic Disorders 6. Summary of Measures Proposed for Adoption and Removal for FY 2018 and Subsequent
Years E. Possible IPFQR Program Measures and Topics for Future Consideration F. Changes to Reporti ng Requirements
1 . Proposed Changes to Reporting by Age and Quarter
2 . Proposed Changes to Aggregate Population Count Reporting
3 . Proposed Changes to Sampling Requirements for FY 2018 Payment Determination and Subsequent Years
G . Public Display and R eview Requirements
H . Form, Manner, and Timing of Quality Data Submission
1. Procedural and Submission Requirements 2. Proposed Change to the Reporting Periods and Submission Timeframes 3. Population, Sampling, and Minimum Case Threshold
4. Data Acc uracy and Completeness Acknowledgement (DACA) Requirements
I . Reconsideration and Appeals Procedures
J . Exceptions to Quality Reporting Requirements VI. Collection of Information Requirements A. Wage Estimates B. ICRs Regarding the Inpatient Psychi atric Quality Reporting (IPFQR) Program
1. Changes in Time Required to Chart

- Abstract Data B ased on Proposed Reporting RequirementsCMS

- 1627

- P 9

2. Estimated Burden of IPFQR Program Proposals
C. Summary of Annual Burden Estimates for Proposed Requirements
D. ICRs Regarding the Hospital and Health Care Complex Cost Report
E. Submission of PRA

- Related Comments VII. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Anticipated Effects 1. Budgetary Impact 2. Impact on Providers 3. Resul ts 4. Effects of Updates to the IPFQR Program 5. Effect on Beneficiaries D. Alternatives Considered E. Accounting Statement Regulations Text Addendum

– FY 2016 Proposed Rates and Adjustment Factors Acronyms Because of the many terms to which we refer by acronym in this propose d rule , we are listing the acronyms used and their corresponding meanings in alphabetical order below:
ADC Average Daily Census
AHA American Hospital Association
AHE Average Hourly EarningCMS

- 1627

- P 10

BBRA Medicare, Medicaid and SCHIP [State Children's Health Insurance Program]

Balanced Budget Refinement Act of 1999 (Pub. L. 106

- 113)
BEA Bureau of Economic Analysis
BLS Bureau of Labor Statistics
CAH Critical A ccess H ospital
CBSA Core

- Based Statistical Area
CCR Cost

- to

- C harge R atio
CPI Consumer Price Index
CPI

- U Consumer Price Index for all Urban Consumers
DRGs Diagnosis

- R elated G roups ECI Employment Cost Index
ESRD End State Renal Disease
FR Federal Register
FTE Full

- time equivalent
FY Federal F isc al Y ear (October 1 thr ough September 30)
GDP Gross Domestic Product
GME Graduate Medical Education
HHA Home Health Agency
HBIPS Hospital Based Inpatient Psychiatric Services
ICD

- 9

- CM International Classification of Diseases, 9 th Revision, Clinical Modification
ICD

- 10

- CM International Classification of Diseases, 10 th Revision, Clinical Modification
ICD

- 10

- PCS International Classification of Diseases, 10 th Revision, Procedure Coding System
IGI I HS Global Insight, Inc.CMS

- 1627

- P 11

I

- O Input

- Output
IPFs Inpatient P sychiatric F acilities IPFQR I n patient P sychiatric F acilities Quality Reporting
IRFs Inpatient R ehabilitation F acilities
LOS Length of Stay
LTCHs Long

- T erm C are H ospitals
MAC Medicare Administrative Contractor MedPAR Medicare P rovider A nalysis and R eview F ile
MFP Multifactor Productivity
MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003
MSA Metropolitan Statistical Area
NAICS North American Industry Classification System NQF National Quality Forum
OES Occupational Employment Statistics
OMB Office of Management and Budget
OPPS Outpatient Prospective Payment System
PLI Professional Liability Insurance
PPI Producer Price Index
PPS Prospective Payment System
RPL Rehabilitation, Psychiatric, and Long

- Term Care
RY Rate Year (July 1 through June 30)
SCHIP State Children's Health Insurance Program
SNF Skilled Nursing FacilityCMS

- 1627

- P 12

SOC Standard Occupational Classification
TEFRA Tax Equity and Fiscal Re sponsibility Act of 1982 (Pub. L. 97

- 248) I. Executive Summary A. Purpose This propose d rule would update the prospective payment rates for Medicare inpatient hospital services provided by inpatient psychiatric facilit i es (IPFs) for discharges occurring during the fiscal year (FY) beginning October 1, 201 5 t hrough September 30 , 201 6

. For the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program, it also would change the measures collected under the program and modify reporting requirements for all program

measures. B. Summary of the Major Provisions In this proposed rule , we would update the IPF Prospective Payment System ( PPS ) , as specified in 42 CFR 412.428. The updates include the following:

 Effective for FY 2016 IPF PPS update, w e are proposing to adopt a FY 2012

- based IPF

specific ma rket basket. We propose to adjust the FY 2012

- based IPF market basket update (currently estimated to be 2. 7 percent) by a reduction for economy

- wide productivity (currently estimated to be 0.6 percentage point) as required by section 1886(s)(2)(A)(i ) of the Social Security Act (the Act) , and further reduced by 0.2 percentage point as required by section 1886(s)(2)(A)(ii) of the Act, resulting in an estimated market basket update of 1. 9 percent.

 We propose to update t he IPF per diem rate from $728.31 to $ 745.19

. Providers that failed to report quality data for FY 2016 payment would receive a proposed FY 2016 per diem rate of $ 730.56

.

 We propose to update the electroconvulsive therapy (ECT) payment from $313.55 toCMS

- 1627

- P 13

$ 320.82

. Providers that failed to r eport quality data for FY 2016 payment would receive a proposed FY 2016 ECT rate of $ 314. 52

.

 We propose to adopt new O ffice of Management and Budget (OMB) Core

- Based Statistical Area ( CBSA ) delineations for the FY 2016 IPF PPS wage index and future IPF PPS wage indices. We propos e to implement these CBSA changes using a 1

- year transition with a blended wage index for all providers , consist ing of a blend of fifty percent of the FY 201 6 IPF wage index using the current OMB delineations and fifty percent of the FY 201 6 IPF wage index using the revised OMB delineations.

 We propose to phase out the rural adjustment for the 37 rural IPFs that would be

re - designated as urban IPFs due to the OMB CBSA changes . Specifically, we propose to phas e
out the 17 percent rural adjustment for these 37 providers over 3 years ( 2

- thirds of the adjustment given in FY 2016, one

- third of the adjustment given in FY 2017, and no rural adjustment thereafter)

.

 We propose to use the updated Labor Related Share of 74.9 percent and CBS A rural and urban w age indices for FY 2016, and establish a wage index budget

- neutrality adjustment of
1 .0041.

 We propose to update the fixed dollar loss thres hold amount from $ 8,755 to $ 9,8 2 5 in order to maintain outlier payments that are 2 percent of total IPF PPS payments.

 We propose that the national urban and rural cost

- to

- charge ratio (CCR) ceilings for FY 2016 would be 1.6881 and 1.9041 , respectively, and the national median CCR would be 0. 4675 for urban IPFs and 0. 6210 for rural IPFs

. The national median CCR is applied to new IPFs that have not yet submitted their first Medicare cost report, to IPFs for which the CCR calculation data are inaccurate or incomplete, or to IPF s whose overall CCR exceeds 3 standard deviationsCMS

- 1627

- P 14

above the national geometric mean. These amounts are used in the outlier calculation to determine if an IPF’s CCR is statistically accurate and for new providers without an established
CCR.

 We note that IPF PPS patient

- level and facility

- level adjustments, other than those mentioned above, would remain the same as in FY 2015. In addition:

 We remind providers that International Classification of Diseases, 10 th Revision, C linical Modification/Procedure Coding System ( ICD

- 10

- CM/PCS ) will be implemented on October 1, 2015.

 As w e continue our analysis for future IPF PPS refinements , we find, from p reliminary analysis of 2012 to 2013 data, that over 20 percent of IPF stays reported no ancillary costs, such as laboratory and drug costs, in their cost reports , or laboratory or drug charges on their claims. Because we expect that most patients requiring hospitalization f or active psychiatric treatment would need drugs and laboratory services, we remind providers that the IPF per diem payment rate includes the cost of all ancillar y services , including drugs and laboratory services

. CMS pays only the inpatient psychiatric facility for services furnished to a Medicare beneficiary who is an inpatient of that inpatient psychiatric facility, except for certain professional services, and payments are considered to be payments in full for all inpatient hospital services provided directly or under arrangement (see 42 CFR 412.404(d)), as specified in 42 CFR 409.10.
For t he Inpatient Psychiatric Facility Quality Reporting ( IPFQR ) Program , we are making several proposals related to measures and several proposals related to data subm ission for the IPFQR Program measures. We are proposing to adopt five new measures beginning with the fiscal year (FY) 2018 payment determination:CMS

- 1627

- P 15

 TOB

- 3

- Tobacco Use Treatment Provided or Offered at Discharge and the subset

measure TOB

- 3a Tobacco Use Treatment at Discharge ( National Quality Forum ( NQF ) #1656);

 SUB

- 2

- Alcohol Use Brief Intervention Provided or Offered and the subset measur e SUB

- 2a (NQF #1663);

 T ransition Record with Specified Elements Received by Discharged P atient s (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF ) #0647);

 Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0648); and

 Screening fo r Metabolic Disorders

. If Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) is adopted, we are proposing
to remove Hospital Based Inpatient Psychiat ric Services ( HBIPS )

- 6 Post

- Discharge Continuing Care Plan (NQF #0557) . Likewise, if Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0648) is adopted, we are proposing to r emove HBIPS

- 7 Post

- Discharge Continuing Care Plan Transmitted to the Next Level of Care Provider Upon Discharge (NQF #0558). We are also proposing to remove one measure, HBIPS

- 4 Patients Discharged on Multiple Antipsychotic Medications , beginning with the FY 2017 payment determination

. We are also making several proposals regarding how facilities should report data for IPFQR Program measures:

 We are proposing to require that measures be reported as a single yearly count rather than by quarter and age beginning with the FY 2017 payment determination;CMS

- 1627

- P 16

 We are proposing to require that aggregate population counts be reported as a single yearly number rather than by quarter beginning with the FY 2017 payment determination; and

 We are proposing to allow uniform sampling for certain measures beginning with the FY 2018 payment determination

. C. Summary of Impacts Provision Description Total Transfers FY 201 6 IPF PPS payment rate update The overall economic impact of this proposed rule is an estimated $ 80 million in increased payments to IPFs during FY 201 6

. Provision Description Costs New quality reporting program requirements The total costs beginning in FY 2016 for IPFs as a result of the proposed new quality reporting requirements are estimated to be $ 6. 31 million

. I I . Background
A

. Overview of the Legislative Requirements for the IPF PPS Section 124 of the Medicare, Medicaid, and SCHIP (State Children's Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106

- 113) required the establishment and implementation of an IPF PPS. Specifically, section 124 of the BBRA mandated that the Secretary of the Department Health and Human Services (the Secretary) develop a per diem PPS for inpatient hospital services furnished in psychiatric hospitals and psychiatric units includ ing an adequate patient classification system tha t reflects the differences in patient resource use and costs among psychiatric hospitals and psychiatric units. Section 405(g)(2) of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108

- 173) extended the IPF PPS to distinct part psychiatric units of critical access hospitals (CAHs).CMS

- 1627

- P 17

Section 3401(f) of the Patient Protection and Affordable Care Act (Pub. L. 111

- 148) as amended by section 10319(e) of that Act and by section 1105(d) of the Health Care and Educati on Reconciliation Act of 2010 (Pub. L. 111

- 152) (hereafter referred to as “the Affordable Care Act”) added subsection (s) to section 1886 of the Act. Section 1886(s)(1) of the Act titled “Reference to Establishment and Implementation of System” refers to section 124 of the BBRA , which relates to the establishment of the IPF PPS. Section 1886(s)(2)(A)(i) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act to the IPF PPS for the Rate Yea r ( RY ) beginning in 201 2 (that is, a RY that coincides with a FY) and each subsequent RY. For the RY beginning in 201 5 (that is, FY 2016 ), the current estimate of the productivity adjustment would be equal to 0. 6 percentage point, which we are proposing in this FY 201 6 proposed rule

. Section 1886(s)(2)(A)(ii) of the Act requires the application of an “other adjustment” that reduces any update to an IPF PPS base rate by percentages specified in section 1886(s)(3) of the Act for the RY beginning in 2010 through the RY beginning in 2019. For the RY beginning in
201 5 (that is , FY 2016 ), section 1886(s)(3)( D ) of the Act requires the reduction to be 0 .2 percentage point. We are proposing that reduction in this FY 201 6 IPF PPS proposed rule

. Section 1886(s)(4) of the Act requires the establishment of a quality data reporting program for the IPF PPS beginning in RY 2014. To implement and periodically update these provisions, we have published various proposed and final rules in the Federal Register . For more information regarding these rules, see the CMS website at http://www.cms.hhs.gov/InpatientPsychFacilPPS/

. B

. Overview of the IPF PPS The November 2004 IPF PPS final rule (69 FR 66922) established the IPF PPS, asCMS

- 1627

- P 18

required by section 124 of the BBRA and codified at subpart N of part 412 of the Medicare regulations. The November 2004 IPF PPS final rule set forth the per diem Federal rates for the implementati on year (the 18

- month period from January 1, 2005 through June 30, 2006), and provided payment for the inpatient operating and capital costs to IPFs for covered psychiatric services they furnish (that is, routine, ancillary, and capital costs, but not cost s of approved educational activities, bad debts, and other services or items that are outside the scope of the IPF PPS). Covered psychiatric services include services for which benefits are provided under the fee

- for

- service Part A (Hospital Insurance Pro gram) of the Medicare program. The IPF PPS established the Federal per diem base rate for each patient day in an IPF derived from the national average daily routine operating, ancillary, and capital costs in IPFs in FY 2002. The average per diem cost was updated to the midpoint of the first year under the IPF PPS, standardized to account for the overall positive effects of the IPF PPS payment adjustments, and adjusted for budget

- neutrality. The Federal per diem payment under the IPF PPS is comprised of the Federal per diem base rate described above and certain patient

- and facility

- level payment adjustments that were found in the regression analysis to be associated with statistically significant per diem cost differences. The patient

- level adjustme nts include age, Diagnosis

- R elated G roup ( DRG ) assignment, comorbidities, and variable per diem adjustments to reflect higher per diem costs in the early days of an IPF stay. Facility

- level adjustments include adjustments for the IPF's wage index, rural l ocation, teaching status, a cost

- of

- living adjustment for IPFs located in Alaska and Hawaii, and the presence of a qualifying emergency department (ED). The IPF PPS provides additional payment policies for: outlier cases; interrupted stays;CMS

- 1627

- P 19

and a per tr eatment adjustment for patients who undergo electroconvulsive therapy ( ECT )

. During the IPF PPS mandatory 3

- year transition period , stop

- loss payments were also provided ; however, since the transition ended in 2008, these payments are no longer available. A complete discussion of the regression analysis that established the IPF PPS adjustment factors appears in the November 2004 IPF PPS final rule (69 FR 66933 through 66936). Section 124 of the BBRA did not specify an annual rate update strategy for the IPF PPS and was broadly written to give the Secretary discretion in establishing an update methodology. Therefore, in the November 2004 IPF PPS final rule, we implemented the IPF PPS using the following update strategy:

 Calculate the final Federal per diem base rate to be budget

- neutral for the 18

- month period of January 1, 2005 through June 30, 2006.

 Use a July 1 through June 30 annual update cycle.

 Allow the IPF PPS first update to be effective for discharges on or after July 1, 2006 through June 30, 2007.
In RY 2012 , we proposed and finalized switching the IPF PPS payment rate update from a rate year that begins on July 1 and ends on June 30 to one that coincides with the Federal fiscal
year that begins October 1 and ends on Sept ember 30 . In order to transition from one timeframe to another , the RY 2012 IPF PPS covered a 15

- month period from July 1 , 2011 through September 30 , 2012

. Therefore, the update cycle for FY 2016 will be October 1, 2015 through September 30, 2016. For f urther discussion of the 15

- month market basket update for RY 2012 and changing the payment rate update period to coincide with a FY period , we refer readers to the RY 2012 IPF PPS proposed rule (76 FR 4998) and the RY 2012 IPF PPS final rule (76 FR 26432)

.CMS

- 1627

- P 20

C. Annual Requirements for Updating the IPF PPS In November 2004, we implemented the IPF PPS in a final rule that appeared in the November 15, 2004 Federal Register (69 FR 66922). In developing the IPF PPS, to ensure that the IPF PPS is able to account adequately for each IPF's case

- mix, we performed an extensive regression analysis of the relationship between the per diem costs and certain patient and facility characteristics to determine those characteristics associated with statistically significant cost differences on a per diem basis. For characteristics with statistically significant cost differences, we used the regression coefficients of those variables to determine the size of the corresponding payment adjustments. In that final rule, we expl ained that we believe it is important to delay updating the adjustment factors derived from the regression analysis until we have IPF PPS data that include as much information as possible regarding the patient

- level characteristics of the population that

e ach IPF serves. Therefore, we indicated that we did not intend to update the regression analysis and the patient

- and facility

- level adjustments until we complete that analysis. Until that analysis is complete, we stated our intention to publish a notice in the Federal Register each spring to update the IPF PPS (71 FR 27041 ). We have begun the necessary analysis to make refinements to the IPF PPS using more current data to set the adjustment factors ; however, we are not proposing any refinements in this proposed rule. Rather, as explained in section IV.B

. of this proposed rule, we expect that in future rulemaking we will be ready to propose potential refinements.
In the May 6, 2011 IPF PPS final rule ( 76 FR 2643 2 ), we changed the payment rate update per iod to a RY that coincides with a FY update. Therefore, update notices are now published in the Federal Register in the summer to be effective on October 1

. When proposingCMS

- 1627

- P 21

changes in IPF payment policy, a proposed rule would be issued in the spring and t he final rule in the summer in order to be effective on October 1. For further discussion on changing the IPF PPS payment rate update period to a RY that coincides with a FY, see the IPF PPS final rule published in the Federal Register on May 6, 2011 (76 FR 26434 through 26435). For a detailed list of updates to the IPF PPS, see 42 CFR 412.428.
O ur most recent IPF PPS annual update occurred in an August 6, 2014, Federal Register final rule (79 FR 45938) (hereinafter referred to as th e August 2014 IPF PPS final rule) that set forth updates to the IPF PPS payment rates for FY 201 5

. That rule updated the IPF PPS per diem payment rates that were published in the August 201 3 IPF PPS notice (78 FR 46734) in accordance with our established policies. III. Provisions of the Proposed Rule
A

. Proposed Market Basket for the IPF PPS
1. Background The input price index that was used to develop the IPF PPS was the Excluded Hospital with Capital market basket. This market basket was based on 1997 Medicare cost reports for Medicare participating IRFs, IPFs, LTCHs, cancer hospitals, and children’s hospitals. Although ‘‘market basket’’ technically describes the mix of goods and services used in providing health

ca re at a given point in time, this term is also commonly used to denote the input price index (that is, cost category weights and price proxies) derived from that market basket. Accordingly, the term ‘‘market basket,’’ as used in this document, refers to a n input price index. Beginning with the May 2006 IPF PPS final rule (71 FR 27046 through 27054), IPF PPS payments were updated using a 2002

- based RPL market basket reflecting the operating and capital cost structures for freestanding IRF s, freestanding IPF s, and LTCHs. Cancer andCMS

- 1627

- P 22

children’s hospitals were excluded from the RPL market basket because their payments are based entirely on reasonable costs subject to rate

- of

- increase limits established under the authority of section 1886(b) of the Act and not t hrough a PPS. Also, the 2002 cost structures for cancer and children’s hospitals are noticeably different than the cost structures of freestanding IRFs, freestanding IPFs, and LTCHs. See the May 2006 IPF PPS final rule ( 71 FR 27046 through 27054 ) for a c omplete discussion of the 2002

- based RPL market basket. In the May 1, 2009 IPF PPS notice (74 FR 203 76) , we expressed our interest in exploring the possibility of creating a stand

- alone IPF market basket that reflects the cost structures of only IPF provid ers. One available option was to combine the Medicare cost report data from freestanding IPF providers with M edicare cost report data from hospital

- based IPF providers. We indicated that an examination of the Medicare cost report data comparing freestand ing IPFs and hospital

- based IPFs showed differences between cost levels and cost structures. At that time, we were unable to fully understand these differences even after reviewing explanatory variables such as geographic variation, case mix (including DR G , comorbidity, and age), urban

or rural status, teaching status, and presence of a qualifying emergency department . As a result, we continued to research ways to reconcile the differences and solicited public comment for additional information that might help us to better understand the reasons for the variations in costs and cost structures, as indicated by the Medicare cost report data ( 74 FR 20376 ). We summarized the public comments we received and our responses in the April 2010 IPF PPS

no tice (75 FR 23111 through 23113)

. Despite receiving comments from the public on this issue, we were still unable to sufficiently reconcile the observed differences in costs and cost structures between hospital

- based and freestanding IPFs, and, therefore, we did not believe it to beCMS

- 1627

- P 23

appropriate at that time to incorporate data from hospital

- based IPFs with those of freestanding IPFs to create a stand

- alone IPF market basket. Beginning with the RY 2012 IPF PPS final rule (76 FR 26432 ), IPF PPS payments were updated usi ng a 2008

- based RPL market basket reflecting the operating and capital cost structures for freestanding IRFs, freestanding IPFs, and LTCHs. The major changes for RY 2012 included: updating the base year from FY 2002 to FY 2008; using a more specific
compo site chemical price proxy; breaking the professional fees cost category into 2 separate categories ( L abor

- related and N onlabor

- related); and adding 2 additional cost categories (Administrative and Facilities Support Services and Financial Services), which were previously included in the residual All Other Services cost categories . The RY 2012 IPF PPS proposed rule (76 FR 4998) and RY 2012 final rule (76 FR 26432) contain a complete discussion of the development of the 2008

- based RPL market basket.
For FY 2 016, we are proposing to create a 2012

- based IPF market basket, using Medicare cost report data for both freestanding and hospital

- based IPFs. In the following discussion, we provide an overview of the proposed market basket and describe the methodologies used to determine the operating and capital portions of the proposed 2012

- based IPF market basket.
2. Overview of the Proposed 2012

- Based IPF Market Basket The proposed 2012

- based IPF market basket is a fixed

- weight, Laspeyres

- type price index. A Laspeyres 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 a base period are not m easured. The index itself is constructed in 3 steps. First, a base period is selected (in this proposed rule, the base period is FY 2012) and total base period expenditures are estimated for a set ofCMS

- 1627

- P 24

mutually exclusive and exhaustive spending categories with the proportion of total costs that each category represents being calculated. These proportions are called cost or expenditure weights. Second, each expenditure category is matched to an appropriate price or wage variable, referred to as a price pro xy. In nearly 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 expenditure weight for each cost category is mul tiplied by the level of its respective price proxy. The sum of these products (that is, the expenditure weights multiplied by their price levels) for all cost categories yields the composite index level of the market basket in a given period. Repeating t his 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 noted above, 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 furnish IPF services . The effects on total expenditures resulting from chang es in the mix of goods and services purchased subsequent to the base period are not measured. For example, an IPF hiring more nurses to accommodate the needs of patients would increase the volume of goods and services purchased by the IPF, but would not b e factored into the price change measured by a fixed

- weight IPF 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 IPFs purchase (facility inputs) to furnish inpatient care between base periods.
3. Creating an IPF

- specific Market BasketCMS

- 1627

- P 25

As discussed in section III.A .1, over the last several years we have been exploring the possibility of creating a stand

- alone, or IPF

- specific, market basket that reflects the cost structures of only IPF providers. The major cost weights for the 2008

- based RPL market basket were calc ulated using Medicare cost report data for freestanding facilities only. We used freestanding facilities due to concerns regarding our ability to incorporate Medicare cost report data for hospital

- based providers. In the FY 2015 IPF PPS final rule (79 FR 45941), we presented several of these concerns (as stated below) but explained that we would continue to research the possibility of creating an IPF

- specific market basket to update IPF PPS payments. Since the FY 2015 IPF PPS final rule, we have perform ed additional research on the Medicare cost report data available for hospital

- based IPFs and evaluated these concerns. We subsequently concluded from this research that Medicare cost report data for both hospital

based IPFs and freestanding IPFs can be u sed to calculate the major market basket cost weights for a stand

- alone IPF market basket. We have developed a detailed methodology to derive market basket cost weights that are representative of the universe of IPF providers. We believe the use of this proposed IPF market basket is a technical improvement over the RPL market basket that is currently used to update IPF PPS payments. As a result, in this FY 2016 IPF PPS proposed rule, we are proposing a 2012

- based IPF market basket that reflects data for both freestanding and hospital

- based IPFs. Below we discuss our prior concerns and provide reasons for why we now feel it is appropriate to create a stand

- alone IPF market basket using Medicare cost report data for both hospital

- based and freestanding IPF s. One concern we discussed in the FY 2015 IPF PPS final rule (79 FR 45941) about using the hospital

- based IPF Medicare cost report data was the cost level differences for hospital

based IPFs relative to freestanding IPFs were not readily explained by the specificCMS

- 1627

- P 26

characteristics of the individual providers and the patients that they serve (for example, characteristics related to c ase mix, urban/rural status, teaching status , or presence of a qualified emergency department ). To address this concern, we use d regression analysis to evaluate the effect of including hospital

- based IPF Medicare cost report data in the calculation of cost distributions. A more detailed description of these regression models can be found in the FY 2015 IPF final rule (79 FR 45941 ). Based on this analysis, we concluded that the inclusion of those IPF providers with unexplained variability in costs did not significantly impact the cost weights and, therefore, should not be a major cause of concern. Another concern regarding the inc orporation of hospital

- based IPF data into the calculation of the market basket cost weights was the complexity of the Medicare cost report data for these providers. The freestanding IPFs independently submit a Medicare cost report for their facilities, m aking it relatively straightforward to obtain the cost categories necessary to determine the major market basket cost weights. However, Medicare cost report data submitted for a hospital

- based IPF are embedded in the Medicare cost report submitted for the entire hospital facility in which the IPF is located. In order to use Medicare cost report data from these providers, we needed to determine the appropriate adjustments to apply to the data to ensure that the cost weights we obtained would represent only the hospital

- based IPF (not the hospital as a whole). Over the past year, we worked to develop detailed methodologies to calculate the major cost weights for both freestanding and hospital

- based IPFs. We believe that our proposed methodologies and the r esulting cost weights, described in section III.A.3.a.i below, are reasonable and appropriate. We welcome public comments on these proposals. We also evaluated the differences in cost weights for hospital

- based and freestanding IPFs and found the most s ignificant differences occurred for salaries and pharmaceutical costs.CMS

- 1627

- P 27

Specifically, the hospital

- based IPF salary cost weights tend to be lower than those of freestanding IPFs while hospital

- based IPF pharmaceutical cost weights tend to be higher than th ose of freestanding IPFs. Our proposed methodology for deriving costs for each of these categories can be found in section III.A.3.a.i below. We will continue to research and monitor these cost shares to ensure that the differences are explainable.
In su mmary, our research over the past year allowed us to evaluate the appropriateness of including hospital

- based IPF data in the calculation of the major cost weights for an IPF market basket. We believe that the proposed methodologies for deriving the cost weights give us the ability to create a stand

- alone IPF market basket that reflects the cost structure of the universe of IPF providers. Therefore, we believe that the use of this proposed 2012

- based IPF market basket to update IPF PPS payments is a n impr ovement over the current 2008

- based RPL market basket.

a. Development of Cost Categories and Weights i. Medicare Cost Reports The proposed 2012

- based IPF market basket consists of seve n major cost categories derived from the FY 2012 Medicare cost reports (CMS Form 2552

- 10) for freestanding and hospital

- based IPFs, including Wages and Salaries, Employee Benefits, Contract Labor, Pharmaceuticals, Professional Liability Insurance (PLI), Cap ital, and a residual. The residual reflects all remaining costs that are not captured in the other six cost categories. The FY 2012 cost reports include providers whose cost report begin date is on or between October 1, 2011, and September 30, 2012. We choose to use FY 2012 as the base year because we believe that the Medicare cost reports for this year represent the most recent, complete set of Medicare cost report data available for IPFs at the time of rulemaking.CMS

- 1627

- P 28

Prior Medicare cost report data u sed to develop the RPL market basket showed large differences between some providers ’ Medicare length of stay (LOS) and total facility LOS. Since our goal is to measure cost weights that are reflective of case mix and practice patterns associated with pro viding services to Medicare beneficiaries, we limited our selection of Medicare cost reports used in the RPL market basket to those facilities that had a Medicare LOS that wa s within a comparable range of their total facility average LOS. For the 2008

- bas ed RPL market basket, we used those IPF Medicare cost reports whose average Medicare LOS was within 30 percent of the average facility LOS if the facility LOS was greater than or equal to 15 days. For those IPFs whose average facility LOS was less than 15 days, the Medicare LOS had to be within 50 percent of the average facility LOS. When applying th e LOS trim to derive the
2008

- based RPL market basket, we found that those providers that were excluded (of which seventy percent were IPFs) had an average fa cility LOS (40 days) that was 2 times larger than the Medicare LOS (20 days). To create the proposed 2012

- based IPF market basket, we reevaluated the LOS trim based on FY 2012 Medicare cost report data and the inclusion of hospital

- based providers.
Bas ed on our analysis of the data, we are proposing to apply a less restrictive LOS trim to derive the 2012

- based IPF market basket than was applied to derive the RPL market basket. For freestanding IPFs , we propose to define the Medicare and facility LOS as those reported on line 14 of Worksheet S

- 3, Part I ( consistent with the RPL market basket method) . For hospital

- based
IPFs , we are proposing to use line 16 of Worksheet S

- 3, Part I to determine the Medicare and facility LOS. To derive the proposed 2012

- based I P F market basket, f or those IPFs with an average facility LOS of greater than or equal to 15 days, we are proposing to include IPFs where the Medicare LOS is within 50 percent (higher or lower) of the average facility LOS. For thoseCMS

- 1627

- P 29

IPFs whose aver age facility LOS is less than 15 days, we are proposing to include IPFs where the Medicare LOS is within 95 percent (higher or lower) of the facility LOS. This less restrictive trim increases the number of IPFs included in the derivation of the market bas ket, particularly for those providers where the Medicare LOS and facility LOS is within 5 days. Applying the proposed trim results in IPF Medicare cost reports with an average
M edicare LOS of 12 days, average facility LOS of 10 days, and Medicare utilizat ion (as measured by Medicare inpatient IPF days as a percentage of total facility days ) of 30 percent. If we were to apply the same trim as was applied for the 2008

- based RPL market basket, it would result in IPF Medicare cost reports with an average M edi care LOS of 12 days, average facility LOS of 9 days, and Medicare utilization of 31 percent. Those providers that were excluded from the proposed 2012

- based IPF market basket have an average Medicare LOS of 22 days , average facility LOS of 49 days , and a Medicare utilization of 5 percent. Of those Medicare cost reports excluded from the proposed 2012

- based IPF market basket, about 70 percent of these were freestanding providers whereas freestanding providers represent about 30 percent of all IPFs. We bel ieve the proposed trim is a technical improvement as data from more IPFs is used while still being reflective of case mix and practice patterns associated with providing services to Medicare beneficiaries. We applied this LOS trim to first obtain a set of cost reports for facilities that have a Medicare LOS within a comparable range of their total facility LOS. Using the resulting set of FY 2012 Medicare cost reports for freestanding IPFs and hospital

- based IPFs, we are proposing to calculate costs for the six major cost categories (Wages and Salaries, Employee Benefits, Contract Labor, Professional Liability Insurance, Pharmaceuticals, and Capital). Similar to the 2008

- based RPL market basket major cost weights, the proposed 2012

-CMS

- 1627

- P 30

based IPF market bask et cost weights reflect Medicare allowable costs (routine, ancillary and capital costs ) that are eligible for inclusion under the IPF PPS payments. We define Medicare allowable costs for freestanding facilities as cost centers (CMS Form 2552

- 10): 30 throu gh 35, 50 through 76 (excluding 52 and 75), 90 through 91 , and 93. We define Medicare allowable costs for hospital

- based facilities as cost centers (CMS Form 2552

- 10): 40, 50 through 76 (excluding 52 and 75), 90 through 91 , and 93. For freestanding IPFs, total Medicare allowable
costs are equal to the total costs as reported on Worksheet B, part I , column 26 . For hospital

based IPFs, total Medicare allowable costs are equal to total costs for the IPF inpatient unit after the allocation of overhead costs (Worksheet B, part I, column 26, line 40) and a portion of total ancillary costs. We calculate the portion of ancillary costs attributable to the hospital

- based IPF for a given ancillary cost center by multiplying total facility ancillary costs for the sp ecific cost center (as reported on Worksheet B, Part I, column 26) by the ratio of IPF Medicare ancillary costs for the cost center (as reported on Worksheet D

- 3, column 3 for IPF subproviders) to total Medicare ancillary costs for the cost center (equal t o the sum of Worksheet D

- 3, column 3 for all relevant PPS ( that is, IPPS, IRF, IPF and Skilled Nursing Facility ( SNF ) )). Below we provide a description of the proposed methodolog ies used to derive costs for the six major cost categories. Wages and Salaries Costs For freestanding IPFs, Wages and Salaries costs are derived as the sum of routine inpatient salaries, ancillary salaries , and a proportion of overhead (or general service cost center) salaries as reported on Worksheet A, column 1. Since ove rhead salary costs are attributable to the entire IPF, we only include the proportion attributable to the Medicare allowable cost centers. We estimate the proportion of overhead salaries that are attributed to Medicare allowable costsCMS

- 1627

- P 31

centers by multiplyi ng the ratio of Medicare allowable salaries to total salaries (Worksheet A, column 1, line 200 ) times total overhead salaries. A similar methodology was used to derive Wages and Salaries costs in the 2008

- based RPL market basket. For hospital

- based IPFs, Wages and Salaries costs are derived as the sum of inpatient unit wages and salaries (Worksheet A, column 1, line 40) and a portion of salary costs attributable to total facility ancillary and overhead cost centers as these cost centers are shared with the entire facility. We calculate the portion of ancillary salaries attributable to the hospital

- based IPF for a given ancillary cost center by multiplying total facility ancillary salary costs for the specific cost center (as reported on Worksheet A, column 1) by the ratio of IPF Medicare ancillary costs for the cost center (as reported on Worksheet D

- 3, column 3 for IPF subproviders) to total Medicare ancillary costs for the cost center (equal to the sum of Worksheet D

- 3, column 3 for all relevant PPS units ( that is, IPPS, IRF, IPF and SNF)). For example, if hospital

- based IPF Medicare laboratory costs represent 10 percent of the total Medicare laboratory costs for the entire facility, then 10 percent of total facility laboratory salaries (as reported in W orksheet A, column 1, line 60) would be attributable to the hospital

- based IPF. We believe it is appropriate to use only a portion of the ancillary costs in the market basket cost weight calculations since the hospital

based IPF only utilizes a portion of the facility’s ancillary services. We believe the ratio of reported IPF Medicare costs to reported total Medicare costs provides a reasonable estimate of the ancillary services utilized, and costs incurred , by the hospital

- based IPF. We calculate the po rtion of overhead salary costs attributable to hospital

- based IPFs by multiplying the total overhead costs attributable to the hospital

- based IPF (sum of columns 4 through 18 on Worksheet B, part I, line 40) by the ratio of total facility overhead salaries (as reported on Worksheet A, column 1, lines 4 through 18) to total facility overhead costs (asCMS

- 1627

- P 32

reported on Worksheet A, column 7, lines 4 through 18). This methodology assumes the proportion of total costs related to salaries for the overhead cost center s is similar for all inpatient unit s ( that is, acute inpatient or inpatient psychiatric ). Since the 2008

- based RPL market basket did not include hospital

- based providers, this proposed methodology cannot be compared to the derivation of Wages and Salaries costs in the 2008

- based RPL market basket. Employee Benefits Costs Effective with our implementation of CMS Form 2552

- 10, CMS began collecting
E mployee B enefits and C ontract L abor data on Worksheet S

- 3, Part V. Previously, with CMS
Form 2540

- 96, Employee Benefits and Contract Labor data were reported on Worksheet S

- 3, part II, which was applicable to only IPPS providers and , therefore, these data were not available for the derivation of the RPL market basket. Due to the lack of such data, the Employee Be nefits
cost weight for the 2008

- based RPL market basket was derived by multiplying the 2008

- based RPL market basket Wages and Salaries cost weight by the ratio of the IPPS hospital market basket Employee Benefits cost weight to the IPPS hospital market bas ket Wages and Salaries cost weight. Similarly , the Contract Labor cost weight for the 2008

- based RPL market basket was derived by multiplying the 2008

- based RPL market basket Wages and Salaries cost weight by the ratio of the IPPS hospital market basket C ontract Labor cost weight to the IPPS hospital market basket Wages and Salaries cost weight.
For FY 2012 Medicare cost report data, while there were providers that did report data on Worksheet S

- 3, part V, many providers did not complete this worksheet. H owever, we believe

we had a large enough sample to enable us to produce reasonable Employee Benefits cost weight s . We continue to encourage all providers to report these data on the Medicare cost report. For freestanding IPFs, Employee Benefits costs ar e equal to the data reported onCMS

- 1627

- P 33

Worksheet S

- 3, Part V, line 2, column 2. For hospital

- based IPFs, we calculate total benefits as the sum of benefit costs reported on Worksheet S

- 3 Part V, line 3, column 2, and a portion of ancillary benefits and overhead benefits for the total facility. Ancillary benefits attributable to the hospital

- based IPF are calculated by multiplying ancillary salaries for the hospital

- based IPF as determined in the derivation of Wages and Salaries for the hospital

- based IPF by the ratio of total facility benefits to total facility salaries. Similarly, overhead benefits attributable to the hospital

- based IPF are calculated by multiplying overhead salaries for the hospital

- based IPF as determined in the derivation of Wages and Salar ies for the hospital

- based IPF by the ratio of total facility benefits to total facility salaries. Contract Labor Costs Similar to the RPL and IPPS market baskets, Contract Labor costs are primarily associated with direct patient care services. Contract labor costs for other services such as accounting, billing, and legal are calculated separately using other government data sources as described in section III.A.3.a.ii

. As discussed above in the Employee Benefits section, we now have data reported on Wor ksheet S

- 3, Part V that we can use to derive the Contract Labor cost weight for the 2012

- based IPF market basket. For freestanding IPFs, Contract Labor costs are based on data reported on Worksheet S

- 3, part V, column 1, line 2 and for hospital

- based IPFs Contract Labor costs are based on line 3 of this same worksheet

. As previously noted, f or FY 2012 Medicare cost report data, while there were providers that did report data on Worksheet S

3, part V, many providers did not complete this worksheet. Howeve r, we believe we had a large enough sample to enable us to produce a reasonable Contract Labor cost weight. We continue to encourage all providers to report these data on the Medicare cost report.CMS

- 1627

- P 34

Pharmaceuticals Costs For freestanding IPFs, pharmaceuti cals costs are based on non

- salary costs reported on Worksheet A , column 7 less Worksheet A, column 1 for the pharmacy cost center (line 15) and drugs charged to patients cost center (line 73). For hospital

- based IPFs, pharmaceuticals costs are based on a portion of the non

- salary pharmacy costs and a portion of the non

- salary drugs charged to patient costs reported for the total facility. Non

- salary pharmacy costs attributable to the hospital

- based IPF are calculated by multiplying total pharmacy costs attri butable to the hospital

- based IP F (as reported on Worksheet B, column 15, line 40) by the ratio of total non

- salary pharmacy costs (Worksheet A, column 2, line 15) to total pharmacy costs (sum of Worksheet A, column 1 and 2 for line 15) for the total facility. Non

- salary drugs charged to patient costs attributable to the hospital

- based IPF are calculated by multiplying total non

- salary drugs charged to patient costs (Worksheet B, part I, column 0, line 73 plus Worksheet B, part I, column 15, line 73 l ess Worksheet A, column 1, line 73) for the total facility by the ratio of Medicare drugs charged to patient ancillary costs for the IPF unit (as reported on Worksheet D

- 3 for IPF subproviders, line 73, column 3) to total Medicare drugs charged to patients ancillary costs for the total facility (equal to the sum of Worksheet D

- 3, line 73, column 3, for all relevant PPS (i.e. IPPS, IRF, IPF and SNF)). Professional Liability Insurance (PLI) Costs For freestanding IPFs, PLI costs (often referred to as malpra ctice costs) are equal to premiums, paid losses and self

- insurance costs reported on Worksheet S

- 2, line 118, columns 1 through 3. For hospital

- based IPFs, we assume that the PLI weight for the total facility is similar to the hospital

- based IPF unit sin ce the only data reported on this worksheet is for the entireCMS

- 1627

- P 35

facility. Therefore, hospital

- based IPF PLI costs are equal to total facility PLI (as reported on Worksheet S

- 2, line 118, columns 1 through 3) divided by total facility costs (as reported on
W orksheet A, line 200) times hospital

- based IPF Medicare allowable total costs

. Capital Costs For freestanding IPFs, capital costs are equal to Medicare allowable capital costs as reported on Worksheet B, Part II, column 26. For hospital

- based IPFs, cap ital costs are equal to IPF inpatient capital costs (as reported on Worksheet B, part II, column 26, line 40) and a portion of IPF ancillary capital costs. We calculate the portion of ancillary capital costs attributable to the hospital

- based IPF for a gi ven cost center by multiplying total facility ancillary capital costs for the specific ancillary cost center (as reported on Worksheet B, Part I I, column 26) by the ratio of IP F Medicare ancillary costs for the cost center (as reported on Worksheet D

- 3, co lumn 3 for IPF subproviders) to total Medicare ancillary costs for the cost center (equal to the sum of Worksheet D

- 3, column 3 for all relevant PPS ( that is, IPPS, IRF, IPF and SNF)). i. Final Major Cost Category Computation After we derive costs for the six major cost categories for each provider using the Medicare cost report data as described above, we trim the data for outliers based on the following steps. First, we divide the costs for each of the six categories by tota l Medicare allowable costs calculated for the provider to obtain cost weights for the universe of IPF providers. Next, we apply a mutually exclusive top and bottom 5 percent trim for each cost weight to remove outliers. A fter the outliers have been remov ed, we sum the costs for each category across all remaining providers. We then divide this by the sum of total Medicare allowable costs across all remaining providers to obtain a cost weight for the proposed 2012

-CMS

- 1627

- P 36

based IPF market basket for the given cate gory. Finally, we calculate the residual “All Other” cost weight that reflects all remaining costs that are not captured in the six cost categories listed above. See Table 1 below for the resulting cost weights for these major cost categories that we obt ain from the Medicare cost reports.

TABLE 1: Major Cost Categories as Derived from Medicare Cost Reports Major Cost Categories 2012
- Based IPF (Percent) 2008
- Based RPL

(Percent) Wages and Salaries 50.8 47.4 Employee Benefits 1 13.0 12.3 Contract Labor 1 1.4 2.6 Professional Liability Insurance (Malpractice) 1.1 0.8
Pharmaceuticals 4.8 6.5 Capital 7.0 8.4 All Other 22.0 22.0 *Total may not sum to 100 due to rounding. 1 \ Due to the lack of Medicare cost report data, the Employee Benefits and Contract Labor cost weights in the 2008

- based RPL market basket were based on the IPPS market basket. The Wages and Salaries cost weight obtained directly from the Medicare cost reports for the proposed 2012

- based IPF market basket is approximately 3 perc entage points higher than the Wages and Salaries cost weight for the 2008

- based RPL market basket. This is the result of freestanding IPFs having a larger percentage of costs attributable to labor than freestanding Inpatient Rehabilitation F acilities (IRF ) and Long

- term care hospitals. These latter facilities were included in the 2008

- based RPL market basket. As we did for the 2008

- based RPL market basket, we propose to allocate the C ontract
L abor cost weight to the Wages and Salaries and Employee Benef its cost weights based on their relative proportions 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 S alaries cost weight as a percent of the sum of the Wages and Salaries cost weight and the Employee Benefits cost weight. This rounded percentage is 80 percent; therefore, we propose to allocate 80 percent of the Contract Labor cost weight to theCMS

- 1627

- P 37

Wages and Salaries cost weight and 20 percent to the Employee Benefits cost weight. Table 2 shows the Wages and Salaries and Employee Benefit cost weights after Contract Labor cost weight allocation for both the proposed 2012

- based IPF market basket and 2008

- based RPL market basket.
Table 2

– Wages and Salaries and Employee Benefits Cost Weights After Contract Labor Allocation Major Cost Categories 2012
- Based IPF 2008
- Based RPL Wages and Salaries 51.9 49.4 Employee Benefits 13.3 12.8
i. Derivation of the Detailed Operating Cost Weights To further divide the “ All Other ” residual cost weight estimated from the FY 2012 Medicare Cost Report data into more detailed cost categories, we propose to use the 2007 Benchmark Input

- Output (I

- O) “U se T able s/B efore R edefinitions /P urchaser V alue ” for North American Industry Classification System ( NAICS ) 622000 Hospitals, published by the Bureau of Economic Analysis (BEA). Th ese data are publicly available at the following website: http://www.bea.gov/industry/io_annual.htm The BEA Benchmark I

– O data are scheduled for publication every five years with t he most recent data available for 2007. T he 2007 Benchmark I

– O data are derived from the 2007 Economic Census and are the building blocks for BEA’s economic accounts. Thus, they represent the most comprehensive and complete set of data on the economic processes or mechanisms by which output is produced and distributed

. 1 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

1 http://www.bea.gov/papers/pdf/IOmanual_092906.pdfCMS

- 1627

- P 38

becomes available

. Instead of using the less detailed Annual I

– O data, we inflate the 2007 Benchmark I

– O data forward to 2012 by applying the annual price changes from the respective price proxies to the appropriate market basket cost categories that are obtained from the 2007 Benchmark I

- O data

. We repeat this practice for each year. We then calculate the cost shares that each cost category represents of the inflated 2012 data. These resulting 2012 cost shares are applied to the All Other residual cost weight to obtain the detailed cost weights for the proposed
2012

- based IPF market basket. For example, the cost for Food: Direct Purchases represents 6.5 percent of the sum of the ‘‘All Other’’ 2007 Benchmark I

– O Hospital Expenditures inflated to 2012; therefore, the Food: Direct Purchases cost weight represents 6.5 percent of the 2012

- based IPF market basket’s “All Other” cost category (22.0 percent) , yielding a “final” Food: Direct Purchases cost weight of 1.4 percent in the proposed 2012

- based IPF market basket (0.065 * 22.0 percent = 1.4 percent). Using this methodology , we derive eighteen detailed IPF market basket cost category weights from the proposed 2012

- based IP F market basket residual cost weight (22.0 percent). These categories are: (1) Electricity , (2) Fuel, Oil, and Gasoline (3) Water & Sewerage (4) Food:
Dir ect Purchases, (5) Food: Contract Services, (6) Chemicals, (7) Medical Instruments, (8) Rubber & Plastics, (9) Paper and Printing Products, (10) Miscellaneous Products, (11) Professional Fees: Labor

- related, (12) Administrative and Facilities Support Servi ces, (13) Installation, Maintenance, and Repair, (14) All Other Labor

- related Services, (15) Professional Fees: Nonlabor

- related, (16) Financial S ervices, (17) Telephone Services, and (18) All Other Nonlabor

- related Services. iii. Derivation of the Detailed Capital Cost WeightsCMS

- 1627

- P 39

As described in section III.A.3.a.i of this preamble, we are proposing a Capital

- Related cost weight of 7.0 percent as obtained from the FY 2012 Medicare cost reports for freestanding and hospital

- based IPF providers. We are proposing to then separate this total Capital

- Related cost weight into more detailed cost categories. Using FY 2012 Medicare cost reports, we are able to group Capital

- Related costs into the following categories: Depreciation, Interest, Lease, and Other Capital

- Related costs. For each of these categories, we are proposing to determine separately for hospital

- based IPFs and freestanding IPFs what proportion of total capital

- related costs the category represent. For freestanding IPFs, we are pr oposing to derive the proportions for Depreciation, Interest, Lease, and Other Capital

- related costs using the data reported by the IPF on Worksheet
A

- 7, which is similar to the methodology used for the 2008

- based RPL market basket. For hospital

- based IP Fs, data for these four categories are not reported separately for the subprovider; therefore, we are proposing to derive these proportions using data reported on Worksheet A

- 7 for the total facility. We are assuming the cost shares for the overall hospit al are representative for the hospital

- based subprovider IPF unit. For example, if depreciation costs make up 60 percent of total capital costs for the entire facility, we believe it is reasonable to assume that the hospital

- based IP F would also have a 60 percent pro portion because it is a subprovider unit contained within the total facility. In order to combine each detailed capital cost weight for freestanding and hospital

- based IPFs into a single capital cost weight for the proposed 2012

- based IPF mar ket basket, we are proposing to weight together the shares for each of the categories (Depreciation, Interest, Lease, and Other Capital

- related costs) based on the share of total capital costs each provider type represents of the total capital costs for al l IPFs for 2012. Applying this methodology results inCMS

- 1627

- P 40

proportions of total capital

- related costs for Depreciation, Interest, Lease and Other Capital

related costs that are representative of the universe of IPF providers. We next are proposing to allocate lease costs across each of the remaining detailed capital

- related cost categories as was done in the 2008

- based RPL market basket. This would result in 3 primary capital

- related cost categories in the proposed 2012

- based IPF market basket: Depreciation, Interest, and Other Capital

- Related costs. Lease costs are unique in that they are not broken out as a separate cost category in the proposed 2012

- based IPF market basket, but rather we are proposing to proportionally distribute these costs among the cost categories of Depreciation, Interest, and Other Capital

- Related, reflecting the assumption that the underlying cost structure of leases is similar to that of capital

- related costs in general. As was done under the 2008

- based RPL market basket, we are pro posing to assume that 10 percent of the lease costs as a proportion of total capital

- related costs represents overhead and assign those costs to the Other Capital

- Related cost category accordingly. We propose to distribute the remaining lease costs propor tionally across the 3 cost categories (Depreciation, Interest, and Other Capital

Related) based on the proportion that these categories comprise of the sum of the Depreciation, Interest, and Other Capital

- related cost categories (excluding lease expenses). This is the same methodology used for the 2008

- based RPL market basket. The allocation of these lea se expenses are shown in Table 3 below. Finally, we are proposing to further divide the Depreciation and Interest cost categories. We are proposing to se parate Depreciation into the following 2 categories: (1) Building and Fixed Equipment ; and (2) Movable Equipment; and proposing to separate Interest into the following 2 categories: (1) Government/ Nonprofit ; and (2) For

- profit.CMS

- 1627

- P 41

To disaggregate the Deprec iation cost weight, we need to de termine the percent of total Depreciation costs for IPFs that is attributable to Building and Fixed Equipment, which we hereafter refer to as the “fixed percentage.” For the proposed 2012

- based IPF market basket, we
are pr oposing to use slightly different methods to obtain the fixed percentages for hospital

- based IPFs compared to freestanding IPFs. For freestanding IPFs, we are proposing to use depreciation data from Worksheet A

- 7 of the FY 2012 Medicare cost reports, sim ilar to the methodology used for the 2008

- based RPL market basket. However, for hospital

- based IPFs, we determined that the fixed percentage for the entire facility may not be representative of the IPF subprovider unit due to the entire facility likely em ploying more sophisticated movable assets that are not utilized by the hospital

- based IPF. Therefore, for hospital

- based IPFs, we are proposing to calculate a fixed percentage using: (1) building and fixture capital costs allocated to the subprovider unit as reported on Worksheet B, part I line 40 ; and (2) building and fixture capital costs for the top five ancillary cost centers utilized by hospital

- based IPFs. We propose to weight these 2 fixed percentages (inpatient and ancillary) using the proportion that each capital cost type represents of total capital costs in the proposed 2012

- based IPF market basket. We are proposing to then weight the fixed percentages for hospital

- based and freestanding IPFs together using the proportion of total capital cost s each provider type represents. To disaggregate the Interest cost weight, we need to determine the percen t of total interest costs for IP Fs that are attributable to government and nonprofit facilities, which we hereafter refer to as the “nonprofit perce ntage.” For the IPF market basket, we are proposing to
use interest costs data from Worksheet A

- 7 of the FY 2012 Medicare cost reports for both freestanding and hospital

- based IPFs, similar to the methodology used for the 2008

- based RPLCMS

- 1627

- P 42

market basket. We are proposing to determine the percent of total interest costs that are attributed to government and nonprofit IPFs separately for hospital

- based and freestanding IPFs. We then are proposing to weight the nonprofit percentages for hospital

- based and free standing IPFs together using the proportion of total capital costs each provider type represe nts. Table 3 below provides the detailed capital cost shares obtained from the Medicare cost reports . Ultimately, these detailed capital cost share s are applied t o the total Capital

- Related cost weight determined in section III.A.3.a.i to split out the total weight of 7.0 percent into more detailed cost categories and weights

. Table 3.
- D etailed Capital Cost Weights for the Proposed 2012
- Based IPF Market Basket
Cost Shares Obtained from Medicare Cost Reports Proposed Detailed Capital Cost Shares after Allocation of Lease Expenses Depreciation 64 % 75 % Building and Fixed Equipment 46 % 53 % Movable Equipment 19 % 22 %
Interest 15 % 17 % Government/Nonprofit 12 % 14 % For Profit 2 % 3 %
Lease 15 % n/a
Other 6% 8 %

v . Proposed 2012

- based IPF Market Basket Cost Categories and Weights Table 4 below shows the cost categories and weights for the proposed 2012

- based IPF market basket compared to the 2008

- based RPL market basket.
Table 4
- Proposed 2012
- based IPF Cost Weights Compared to 2008
- based RPL Cost WeightsCMS

- 1627

- P 43

Cost Category Proposed 2012
- based I P F Cost Weight 2008
- based

RPL Cost Weight
Total 100.0 100.0 Compensation 65.2 62.3 Wages and Salaries 51.9 49.4 Employee Benefits 13.3 12.8 Utilities 1.8 1.6 Electricity 0.8 1.1 Fuel, Oil, and Gasoline 0.9 0.4 Water & Sewerage 0.1 0.1 Professional Liability Insurance 1.1 0.8 Malpractice 1.1 0.8 All Other Products and Services 25.0 27.0 All Other Products 11.7 15.6 Pharmaceuticals 4.8 6.5 Food: Direct Purchases 1.4 3.0 Food: Contract Services 0.9 0.4 Chemicals 0.6 1.1 Medical Instruments 1.9 1.8 Rubber & Plastics 0.5 1.1 Paper and Printing Products 1.0 1.0 Apparel

- 0.2 Machinery and Equipment

- 0.1 Miscellaneous Products 0.7 0.3 All Other Services 13.3 11.4 Labor
- Related Services 6.7 4.7 Professional Fees: Labor

- related 2.9 2.1 Admin istrative and Facilities Support Services 0.7 0.4 Installation, Maint enance , and Repair 1.6

- All Other: Labor

- related Services 1.5 2.1 Nonlabor
- Related Services 6.6 6.7 Professional Fees: Nonlabor

- related 2.6 4.2 Financial services 2.3 0.9 Telephone Services 0.6 0.4 Postage

- 0.6 All Other: Nonlabor

- related Services 1.1 0.6 Capital
- Related Costs 7.0 8.4 Depreciation 5.2 5.5 Fixed Assets 3.7 3.3CMS

- 1627

- P 44
Movable Equipment 1.5 2.2 Interest Costs 1.2 2.0 Government/Nonprofit 1.0 0.7 For Profit 0.2 1.3 Other Capital
- Related Costs 0.6 0.9 Other Capital

- Related Costs 0.6 0.9 The proposed 2012

- based IPF market basket does not include separate cost categories for Apparel, Machinery & Equipment, and Postage. Due to the small weight s associated with these detailed categories and relatively stable price growth in the applicable price proxy, we are proposing to include Apparel and Machinery & Equipment in the Miscellaneous Products cost category and Postage in the All

- Other Nonlabor

- related Services. We note that these Machinery & Equipment expenses are for equipment that is paid for in a given year and not depreciated over the assets ’ useful life. Depreciation expenses for movable equipment are reflected in the Capital

related costs of the proposed 2012

- based IPF market basket. For the proposed 2012

- based IPF market basket, we are also proposing to include a separate cost category for Insta llation, Maintenance, and Repair. b. Selection of Price Proxies After developing the cost weights for the proposed 2012

- based IPF market basket, we selected the most appropriate wage and price proxies currently available to represent the rate of price chang e for each expenditure category. For the majority of the cost weights, we base the price proxies on Bureau of Labor Statistics (BLS) data and group them into one of the following BLS categories:

 Employment Cost Indexes . Employment Cost Indexes (ECIs) mea sure the rate of change in employment 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 H ourly Earnings (AHE) as priceCMS

- 1627

- P 45

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 North American Classification System (NAICS) and the occupational ECIs are based on the Standard Occupational Classification System (SOC).

 Producer Price Indexes . Producer Price Indexes (PPIs) measure price changes for goods sold in ot her than retail markets. PPIs are used when the purchases of goods or services are made at the wholesale level.

 Consumer Price Indexes . Consumer Price Indexes (CPIs) measure change in the prices of final goods and services bought by consumers. CPIs are only used when the purchases are similar to those of retail consumers rather than purchases at the wholesale level, or if no appropriate PPIs a re available. We evaluated the price proxies using the criteria of reliability, timeliness, availability, and rel evance:

 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. Lo w 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 baskets are updated quarterly and , therefore, it is important for the underlying price proxies to be up

- to

- date, reflecting the most rec ent data available. We believeCMS

- 1627

- P 46

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 di sseminated 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 applicabl e and representative of the cost category weight to which it is applied. The CPIs, PPIs, and ECIs that we have selected to propose in this regulation meet these criteria. Therefore, we believe that they continue to be the best measure of price changes f or the cost categories to which they would be applied. Table 6 lists all price proxies for the proposed 2012

- based IPF market basket. Below is a detailed explanation of the price proxies we are proposing for each cost category weight. i. Price Proxies for the Operating Portion of the Proposed 2012

- Based IPF Market Basket Wages and Salaries
To measur e wage price gro wth in the proposed 2012

- based IPF market basket, we are proposing to apply a proxy blend based on six occupational subcategories wi thin the W ages and
S alaries category, which would reflect the IPF occupational mix. T here is not a published wage proxy for IPF workers. The 2008

- based RPL market basket uses the ECI for Wages and Salaries for All Civilian workers in Hospitals (BLS serie s code #CIU1026220000000I) to proxy these
expenses. We propos e to use the National I ndustry

- S pecific O ccupational E mployment and W ageCMS

- 1627

- P 47

estimates for North American Industrial Classification System (NAICS) 6222 00, Psychiatric & Substance Abuse Hospitals , p ublished by the BLS Office of Occupational Employment Statistics (OES) , as the data source for the wage cost shares in the wage proxy blend

. We propose to use OES’ May 2012 data. Detailed information on the methodology for the national industry

specific occupational employment and wage estimates survey can be found at http://www.bls.gov/oes/current/oes_tec.htm

. Based on the OES data, there are six wage subcategories : Management; NonHealth Professional and Technical ; Health Professional and Technical; Health Service ; NonHealth Service ; and Clerical. Table 5 lists the proposed 2012 occupational assignments for the six wage subcategories.

TABLE 5: Proposed 2012 Occupational Assignmen ts for IPF Wage Blend

2012 Proposed Occupational Groupings Group 1 Management 11

- 0000 Management Occupations Group 2 NonHealth Professional & Technical 13

- 0000 Business and Financial Operations Occupations 15

- 0000 Computer and Mathematical Science Occupations 17

- 0000 Architecture and Engineering Occupations 19

- 0000 Life, Physical, and Social Science Occupations 23

- 0000 Legal Occupations 25

- 0000 Education, Training, and Library Occupations 27

- 0000 Arts, Design, Entertainment, Sports, and Media Occupations Group 3 Health Professional & Technical 29

- 1021 Dentists, General 29

- 1031 Dietitians and Nutritionists 29

- 1051 Pharmacists 29

- 1062 Family and General Practitioners 29

- 1063 Internists, General 29

- 1069 Physicians and Surgeons, All Other 29

- 1071 Physician Assistants 29

- 1111 Registered Nurses 29

- 1122 Occupational Therapists 29

- 1123 Physical TherapistsCMS

- 1627

- P 48

29

- 1125 Recreational Therapists 29

- 1126 Respiratory Therapists 29

- 1127 Speech

- Language Pathologists 29

- 1129 Therapists, All Other 29

- 1199 Health Diagnosing and Treating Practitioners, All Other Group 4 Health Service 21

- 0000 Community and Social Services Occupations 29

- 2011 Medical and Clinical Laboratory Technologists 29

- 2012 Medical and Clinical Laboratory Technicians 29

- 2021 Dental Hygienists 29

- 2032 Diagnostic Medical Sonographers 29

- 2034 Radiologic Technologists and Technicians 29

- 2041 Emergency Medical Technicians and Paramedics 29

- 2051 Dietetic Technicians 29

- 2052 Pharmacy Technicians 29

- 2054 Respiratory Therapy Technicians 29

- 2061 Licensed Practical and Licensed Vocational Nurses 29

- 2071 Medical Records and Health Information Technicians 29

- 2099 Health Technologists and Technicians, All Other 29

- 9012 Occupational Health and Safety Technicians 29

- 9099 Healthcare Practitioner and Technical Workers, All Other 31

- 0000 Healthcare Support Occupations Group 5 NonHealth Service 33

- 0000 Protective Service Occupations 35

- 0000 Food Preparation and Serving Related Occupations 37

- 0000 Building and Grounds Cleaning and Maintenance Occupations 39

- 0000 Personal Care and Service Occupations 41

- 0000 Sales and Related Occupations 47

- 0000 Construction and Extraction Occupations 49

- 0000 Installation, Maintenance, and Repair Occupations 51

- 0000 Production Occupations 53

- 0000 Transportation and Material Moving Occupations Group 6 Clerical 43

- 0000 Office and Administrative Support Occupations Total expenditures by occupation (i.e. , occupational assignment) were calculated by taking the OES number of employees multiplied by the OES annual average salary. The se expenditures were aggregated based on the six groups in Table 6. We next calculated the proportion of each group’s expenditures relative to the total expenditures of all six groups.CMS

- 1627

- P 49

These prop ortions, listed in Table 5 , represent the weights used in the wage proxy blend. We propose using the published wage proxies in Table 6 for each of the six groups ( that is, wage subcategories) as we believe these six price proxies are the most technically appropriate indices available to measure the price growth of the Wages and Salaries cost category in the proposed
2012

- based IPF market basket.

TABLE 6: Proposed 2012
- Based IPF Market Basket Wage Proxy Blend

A comparison of the yearly changes from FY 2012 to FY 2015 for the proposed 2012

- based IPF wage blend and the 2008

- based RPL wage proxy is shown in Table 7. The average annual increase in the 2 price proxies is similar, and in no year is the difference greater than 0.2 percentage point. Wage Subcategory Wage Blend

Weight Price Proxy BLS Series ID

Health Service 36.2 ECI for Wages and Salaries for All Civilian workers in Healthcare and Social

Assistance CIU1026200000000I
Health Professional and Technical 33.5 ECI for Wages and Salaries for All Civilian workers in Hospital s CIU1026220000000I

NonHealth Service 9.2 ECI for Wages and Salaries for Private Industry workers in Service Occupations CIU2020000300000I Non Health Professional and Technical 7.3 ECI for Wages and Salaries for Private Industry workers in Professional, Scientific, and Technical Services CIU2025400000000I
Management 7.1 ECI for Wages and Salaries for Private Industry workers in Manage ment, Business, and Financial CIU2020000110000I

Clerical 6.7 ECI for Wages and Salaries for Private Industry workers in Office and Administrative Support CIU2020000220000I

(a) T o t a l 100.0 TotalCMS

- 1627

- P 50

TABLE 7: Fiscal Year Growth in the Proposed 2012
- based IPF Wage Proxy Blend and 2008
- based RPL Wage Proxy

2012 2013 2014 2015 Average 2012

- 2015 2012

- based IPF Proposed Wage Proxy Blend 1.6 1.6 1.6 2. 2 1. 8 2008

- based RPL Wage Proxy 1.5 1.5 1.5 2.0 1.6 ** Source: IHS Global Insight, Inc

. , 1st Quarter 201 5 forecast with historical data through 4 th Quarter 201 4

Benefits For measuring benefits price gro wth in the proposed 2012

- based IPF market basket, we are proposing to apply a benefits proxy blend based on the same six subcategories and the same six blend weights proposed for the wage proxy blend. These s ubcategories and blend weights

are listed in Table 8. Applicable benefit ECIs, that are identical in industry definition to the wage blend ECIs, were selected for each of the six subcategories. These proposed benefit ECIs, listed in Table 8, are not pu blically avai lable. Therefore, we calculated “ECIs for Total Benefits” using publically available “ ECI s for Total Compensation” for each subcategory and the relative importance of wages within that subcategory’s total compensation. This is the same benef its ECI methodology we implemented in our IPPS, SNF, HHA, RPL, LTCH, and ESRD market baskets. We believe the six price proxies listed in Table 8 are the most technically appropriate indices to measure the price growth of the Benefits cost category in the p roposed 2012

- based IPF market basket. The current 2008

- based RPL market basket uses the ECI for Benefits for All Civilian Workers in Hospitals to proxy Benefit expenses.CMS

- 1627

- P 51
TABLE 8: Proposed 2012
- Based IPF Market Basket Benefits Proxy Blend Wage Subcategory Wage Blend Weight Price Proxy

Health Service 36.2 ECI for Total Benefits for All Civilian workers in Healthcare and Social

Assistance Health Professional and Technical 33.5 ECI for Total Benefits for All Civilian workers in Hospital s NonHealth Service 9.2 ECI for Total Benefits for Private Industry workers in Service Occupations Non Health Professional and Technical 7.3 ECI for Total Benefits for Private Industry workers in Professional, Scientific, and Technical Services Management 7.1 ECI for Total Benefits for Private Industry workers in Manage ment, Business, and Financial
Clerical 6.7 ECI for Total Benefits for Private Industry workers in Office and Administrative Support (b) T o t a l 100.0
A comparison of the yearly changes from FY 2012 to FY 2015 for the proposed 2012

- based IPF benefit proxy blend and the 2008

- based RPL benefit proxy is shown in Table 9. The average annual increase in the 2 price proxies is similar, and in no year is the d ifference greater than 0.4 percentage point.

TABLE 9: Fiscal Year Growth in the Proposed 2012
- based IPF Benefit

Proxy Blend and 2008
- based RPL Benefit Proxy
2012 2013 2014 2015 Average 2012

- 2015 2012

- based IPF Proposed Benefit Proxy Blend 2.5 1.9 2.0 2. 2 2.2 2008

- based RPL Benefit Proxy 2.1 1.8 2.1 2. 1 2. 0 Source: IHS Global Insight, Inc

. , 1 st Quarter 201 5 forecast with historical data through 4 th Quarter 201 4 Electricity
We are propos ing to continue to us e the PPI for Commercial Electric Power (BLS series code #WPU0542) to measure the price growth of this cost category. This is the same price proxy used in the 2008

- based RPL market basket.

TotalCMS

- 1627

- P 52

Fuel, Oil, and Gasoline We are proposing to change the proxy used for the Fuel, Oil, and Gasoline cost category. The 2008

- based RPL market basket uses the PPI for Petroleum Refineries (BLS series code
# PCU32411

- 32411 ) to proxy these expenses

. For the proposed 2012

- based IPF market basket, we are proposing to use a blend of the PPI for Petroleum Refineries and the PPI Commodity for Natural Gas (BLS series code #WPU0531). Our analysis of the Bureau of Econom ic Analysis’ 2007 Benchmark Input

- Outp ut data (use table before redefinitions, pur chaser’s value for NAICS 622000 [ Hospitals ]) , shows that Petroleum Refineries expenses accounts for approximately 70 percent and Natural Gas accounts for approximately 30 percent of the Fuel, Oil, and Gasoline ex penses. Therefore, we propose a blend using 70 percent of the PPI for Petroleum Refineries (BLS series code
# PCU32411

- 32411 ) and 30 percent of the PPI Commodity for Natural Gas ( BLS series c ode
# WPU0531 ). We believe that these 2 price proxies are the mo s t technically appropriate indices available to measure the price growth of the Fuel, Oil, and Gasoline cost category in the proposed 2012

- based IPF market basket

. Water and Sewerage
We are propos ing to continue to us e the CPI for Water and Sewerage Mainte nance (BLS series code #CUUR0000SEHG01) to measure the price growth of this cost category. This is the same proxy used in the 2008

- based RPL market basket. Professional Liability Insurance
We are proposing to continue to use the CMS Hospital Professional Liability Index to

measure changes in professional liability i nsurance ( PLI ) premiums. To generate this index , we collect commercial insurance premiums for a fixed level of coverage while holding non

- priceCMS

- 1627

- P 53

factors constant (such as a change in the level of coverage). This is the same proxy used in the
2008

- based RPL market basket. Pharmaceuticals
We are proposing to continue to use the PPI for Pharmaceuticals for Human Use, Prescription (BLS series code # WPUSI07003) to measure t he price growth of this cost category. This is the same proxy used in the 2008

- based RPL market basket. Food: Direct Purchases
We are proposing to continue to use the PPI for Processed Foods and Feeds (BLS series code # WPU02) to measure the price growth o f this cost category. This is the same proxy used in the 2008

- based RPL market basket. Food: Contract Purchases
We are proposing to continue to use the CPI for Foo d Away From Home (BLS series code # CUUR0000SEFV) to measure the price growth of this cost ca tegory. This is the same
proxy used in the 2008

- based RPL market basket. Chemicals
We are proposing to continue to use a four part blended PPI composed of the PPI for Industrial Gas Manufacturing (BLS series code PCU325120325120P ), the PPI for Other Basic Inorganic Chemical Manufacturing (BLS series code #PCU32518

- 32518), the PPI for Other Basic Organic Chemical Manufacturing (BLS series code #PCU32519

- 32519), and the PPI for Soap and Cleaning Compound Manufacturing (BLS series co de #PCU32561

- 32561 ). We propose updating the blend weights using 2007 Benchmark I

- O data which , compared to 2002 Benchmark I

- O data , is weighted more toward organic chemical products and weighted less toward inorganic chemical products.CMS

- 1627

- P 54

Table 10 below sh ows the proposed weights for each of the four PPIs used to create the blended PPI. These are the same four proxies used in the 2008

- based RPL market basket; however, the blended PPI weights in the 2008

- based RPL market baskets were based on 2002 Benchmark I

- O data. TABLE 10: Blended Chemical PPI Weights

Name Proposed 2012
- based IPF Weights 2008
- based

RPL Weights NAICS PPI for Industrial Gas Manufacturing 32 % 35% 325120 PPI for Other Basic Inorganic Chemical Manufacturing 17 % 25% 325180 PPI for Other Basic Organic Chemical Manufacturing 45 % 30% 325190 PPI for Soap and Cleaning Compound Manufacturing 6 % 10% 325610 Medical Instruments We are proposing to use a blend for the Medical Instruments cost category. The 2007 Benchmark Input

- Output data shows an approximate 50/50 split between S urgical and M edical
I nstrument s and M edical and S urgical A ppliances and S upplies for this cost category. Therefore, we propose a blend composed of 50 percent of the commodity

- based PPI for Surgical and Medical Ins truments (BLS code # WPU1562) and 50 percent of the commodity

- based PPI for Medical and Surgical A ppliances and S u pplies (BLS code # WPU1563) . The 2008

- based RPL market basket uses the single, higher level PPI for Medical, Surgical, and Personal Aid Devices (BLS series code # WPU156)

. Rubber and Plastics
We are proposing to continue to use the PPI for Rubber and Plastic Products (BLS series code # WPU07) to measure price growth of this cost category. This is the same proxy used in the
2008

- based RPL market basket. Paper and Printing ProductsCMS

- 1627

- P 55

We are proposing to continue to use the PPI for Converted Paper and Paperboard Products (BLS series code # WPU0915) to measure the price growth of this cost category. This is the same proxy used in the 2008

- based RPL market basket. Miscellaneous Products
We are proposing to continue to use the PPI for Finished Goods Less Food and Energy (BLS series code # WPUSOP3500) to measure the price growth of this cost category. This is the same proxy used in the 2008

- based RPL m arket basket. Professional Fees: Labor

- Related
We are proposing to continue to use the ECI for Total Compensation for Private Industry workers in Professional and Related (BLS series code # CIU2010000120000I ) to measure the price growth of this category. T his is the same proxy used in the 2008

- based RPL market basket. Administrative and Facilities Support Services
We are proposing to continue to use the ECI for Total Compensation for Private Industry workers in Office and Administrative Support (BLS series code # CIU2010000220000I ) to measure the price growth of this category. This is the same proxy used in the 2008

- based RPL market basket. Installation, Maintenance, and Repair
We are proposing to use the ECI for Total C ompensation for Civilian workers in
I nstallation, Maintenance, and R epair ( BLS series code # CIU1010000430000I ) to measure the price growth of this new cost category. Previously these costs were included in the All Other: Labor

- related Services category and were proxied by the ECI for Total Compensation for Private Industry workers in Service Occupations (BLS series code # CIU2010000300000I)

. We believeCMS

- 1627

- P 56

that this index better reflects the price changes of labor associated with maintenance

- related services and its incorporation represents a tec hnical improvement to the market basket. All Other: Labor

- Related Services
We are proposing to continue to use the ECI for Total Compensation for Private Industry workers in Service Occupations (BLS series code # CIU2010000300000I) to measure the price
grow th of this cost category. This is the same proxy used in the 2008

- based RPL market basket. Professional Fees: Nonlabor

- Related
We are proposing to continue to use the ECI for Total Compensation for Private Industry workers in Professional and Related (BL S series code # CIU2010000120000I ) to measure the price growth of this category. This is the same proxy used in the 2008

- based RPL market basket

. Financial Services
We are proposing to continue to use the ECI for Total Compensation for Private Industry

wo rkers in Financial Activities (BLS series code # CIU201520A000000I) to measure the price growth of this cost category. This is the same proxy used in the 2008

- based RPL market basket

. Telephone Services
We are proposing to continue to use the CPI for Tele phone Services (BLS series code
# CUUR0000SEED) to measure the price growth of this cost category. This is the same proxy used in the 2008

- based RPL market basket

. All Other: Nonlabor

- Related Services
We are proposing to continue to use the CPI for All Items Less Food and Energy (BLS series code # CUUR0000SA0L1E) to measure the price growth of this cost category. This is the

same proxy used in the 2008

- based RPL market basket

. ii. Price Proxies for the Capital Portion of the Proposed 2012

- Based IPF Market Basket Capital Price Proxies Prior to Vintage WeightingCMS

- 1627

- P 57

We are proposing to apply the same price proxies to the detailed capital

- related cost categories as were applied in the 2008

- base d RPL market baske t, which are provided in Table 12 and described below. W e are also proposing to continue to vintage weight the capital price proxies for Depreciation and Interest in order to capture the long

- term consumption of capital. This vintage we ighting method is similar to the method used for the 2008

- based RPL market basket and is described below. We are proposing to proxy the Depreciation: Building and Fixed Equipment cost category by BEA's Chained Price Index for Nonresidential Construction f or Hospitals and Special Care Facilities (BEA Table 5.4.4. Price Indexes for Private Fixed Investment in Structures by Type). We are proposing to proxy the Depreciation: Movable Equipment cost category by the PPI for Machinery and Equipment (BLS series co de # WPU11). We are proposing to proxy the Nonprofit Interest cost category by the average yield on domestic municipal bonds (Bond Buyer 20

- bond index). We are proposing to proxy the For

- profit Interest cost category by the average yield on Moody's Aaa bo nds (Federal Reserve). We are proposing to proxy the Other Capital

- Related cost category by the CPI

- U for Rent of Primary Residence (BLS series code # CUUS0000SEHA). We believe these are the most appropriate proxies for
IP F capital

- related costs that meet our selection criteria of relevance, timeliness, availability, and reliability. Vintage Weights for Price Proxies Because capital is acquired and paid for over time, capital

- related expenses in any given year are determined by both past and present purcha ses of physical and financial capital. The vintage

- weighted capital

- related portion of the proposed 2012

- based IPF market basket is intended to capture the long

- term consumption of capital, using vintage weights for depreciationCMS

- 1627

- P 58

(physical capital) and int erest (financial capital). These vintage weights reflect the proportion of capital

- related purchases attributable to each year of the expected life of building and fixed equipment, movable equipment, and interest. We are proposing to use vintage weights to compute vintage

- weighted price changes associated with depreciation and interest expenses. Capital

- related costs are inherently complicated and are determined by complex capital

- related 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 c hanges. Annual non

- vintage 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 IPF capital

- related costs. The capital

- related component of the proposed 2 012

- based IPF market basket reflects the underlying stability of the capital

- related acquisition process. To calculate the vintage weights for depreciation and interest expenses, we first need a time series of capital

- related purchases for building and fix ed equipment and movable equipment. We found no single source that provides an appropriate time series of capital

- related purchases by hospitals for all of the above components of capital purchases. The early Medicare cost reports did not have sufficient capital

- related data to meet this need. Data we obtained from the American Hospital Association (AHA) do not include annual capital

- related purchases. However, the AHA does provide a consistent database of total expenses back to 1963. Consequently, we are proposing to use data from the AHA Panel Survey and the AHA Annual Survey to obtain a time series of total expenses for hospitals. We are then proposing to use data from the AHA Panel Survey supplemented with the ratio of depreciation to total hospita lCMS

- 1627

- P 59

expenses obtained from the Medicare cost reports to derive a trend of annual depreciation expenses for 1963 through 2012. We propose to separate these depreciation expenses into annual amounts of building and fixed equipment depreciation and movable equ ipment depreciation as determined above. From these annual depreciation amounts we derive annual end

- of

- year book val ues for building and fixed equipment and movable equipment using the expected life for each type of asset category. While data are not av ailable that are specific to IPFs, we believe this information for all hospitals serves as a reasonable alternative for the pattern of depreciation for IPFs

. To continue to calculate the vintage weights for depreciation and interest expenses, we also nee d the expected lives for Building and Fixed Equipment, Movable Equipment, and Interest for the proposed 2012

- based IPF market basket. We are proposing to calculate the expected lives using Medicare cost report data from freestanding and hospital

- based IPF s. 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 depreciat ion were to continue at current year levels, assuming straight

- line depreciation. We are proposi ng to determine the expected life of building and fixed equipment separately for hospital

- based IPFs and freestanding IPFs and weight these expected lives usin g the p ercent of total capital costs each provider type represents. We are proposing to apply a similar method for movable equipment. Using these proposed methods, we determined the average expected life of building and fixed equipment to be equal to 23 years, and the average expected life of movable equipment to be equal to 11 years. For the expected life of interest, we believe vintage weights for interest should represent the average expected life of building and fixed equipment because, based on prev ious research described in the FY 1997CMS

- 1627

- P 60

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 for the 2008

- based RPL market basket, we used FY 2008 Med icare cost reports for IPPS hospitals to determine the expected life of building and fixed equipment and movable equipment (76 FR 51763). The 2008

- based RPL market basket was based on an expected average life of building and fixed equipment of 26 years

an d an expected average life of movable equipment of 11 years, which were both calculated using data for IPPS hospitals. Multiplying these expected lives by the annual depreciation amounts results in annual
year - end asset costs for building and fixed equip ment and movable equipment. We then calculate a time series, beginning in 1964, of annual capital purchases by subtracting the previous year’s asset costs from the current year’s asset costs. For the building and fixed equipment and movable equipment vi ntage 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 by the associated price proxy as provided above. For the interest vintage weights, we are proposing to use the total nominal annual capital

- related purchase amounts to capture the value of the d ebt instrument (including, but not limited to, mortgages and bonds). Using these capital

- related purchase time series specific to each asset type, we are proposing to calculate the vintage weights for building and fixed equipment, for movable equipment, a nd 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, 23 years, and in the case of movable equipment, 1 1 years). For each asset type, we usedCMS

- 1627

- P 61

the time series of annual capital

- related purchase amounts available from 2012 back to 1964. These data allow us to derive twenty

- seven 23

- year periods of capital

- related purchases for building and fixed equipment a nd interest, and thirty

- nine 11

- year periods of capital

- related purchases for movable equipment. For each 23

- year period for building and fixed equipment and interest, or 11

- year period for movable equipment, we calculate annual vintage weights by dividin g the capital

- related purchase amount in any given year by the total amount of purchases over the entire 23

- year or 11

- year period. This calculation is done for each year in the 23

- year or 11

- year period and for each of the periods for which we have data. We then calculate 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. The vintage weights for the capital

- related portion of the 2008

- based RPL market baske t and the proposed 2012

- based IPF market basket

are presented in Table 11 below.
Table 11: 2008
- Based RPL market basket and Proposed 2012
- based IPF market basket Vintage Weights for Capital
- Related Price Proxies Year Building and Fixed

Equipment Movable Equipment Interest 2012
- based 23 years 2008
- based

26 years 20 12
-

based 11 years 20 08
-

based 11 years 2012
-

based 23 years 2008
-

based 26 years 1 0.029 0.021 0.069 0.071 0.017 0.010 2 0.031 0.023 0.073 0.075 0.019 0.012 3 0.034 0.025 0.077 0.080 0.022 0.014 4 0.036 0.027 0.083 0.083 0.024 0.016 5 0.037 0.028 0.087 0.085 0.026 0.018 6 0.039 0.030 0.091 0.089 0.028 0.020 7 0.040 0.031 0.096 0.092 0.030 0.021 8 0.041 0.033 0.100 0.098 0.032 0.024 9 0.042 0.035 0.103 0.103 0.035 0.026 10 0.044 0.037 0.107 0.109 0.038 0.029 11 0.045 0.039 0.114 0.116 0.040 0.033 12 0.045 0.041

-- -- 0.042 0.035 13 0.045 0.042

-- -- 0.044 0.038 14 0.046 0.043

-- -- 0.046 0.041 15 0.046 0.044

-- -- 0.048 0.043CMS

- 1627

- P 62

Year Building and Fixed

Equipment Movable Equipment Interest 2012
- based 23 years 2008
- based

26 years 20 12
-

based 11 years 20 08
-

based 11 years 2012
-

based 23 years 2008
-

based 26 years 16 0.048 0.045

-- -- 0.053 0.046 17 0.049 0.046

-- -- 0.057 0.049 18 0.050 0.047

-- -- 0.060 0.052 19 0.051 0.047

-- -- 0.063 0.053 20 0.051 0.045

-- -- 0.066 0.053 21 0.051 0.045

-- -- 0.067 0.055 22 0.050 0.045

-- -- 0.069 0.056 23 0.052 0.046

-- -- 0.073 0.060 24

-- 0.046

-- -- -- 0.063 25

-- 0.045

-- -- -- 0.064 26

-- 0.046

-- -- -- 0.068 Total 1.000 1.000 1.000 1.000 1.000 1.000 Note: Numbers may not add to total due to rounding. 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 11 is applied to the most recent data point. We have provided on the CMS W eb site an examp le of how the vintage weighting price proxies are calculated, using example vintage weights and example price indices. The example can be found at the following link: http://www.cms.gov/Research

Statistics

- Data

- and

- Systems/Statistics

- Trends

- and

Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file titled “Weight
Calculations as desc ribed in the IPPS FY 2010 Proposed Rule

. ” iii. Summary of Price Proxies of the Proposed 2012

- Based IPF Market Basket Table 12 shows both the operating and capital price proxies for the proposed 2012

- based IPF Market Basket.CMS

- 1627

- P 63

TABLE 12: Price Proxies for the Proposed 2012
- based IPF Market Basket

Cost Description Price Proxies Weight (percent) Total 100.0 Compensation 65.2 Wages and Salaries Blended Wages and Salaries Price Proxy 51.9 Employee Benefits Blended Benefits Price Proxy 13.3 Utilities 1.8 Electricity PPI for Commercial Electric Power 0.8 Fuel, Oil, and Gasoline Blend of the PPI for Petroleum Refineries and PPI for Natural Gas 0.9 Water & Sew er age CPI

- U for Water and Sewerage Maintenance 0.1 Professional Liability Insurance 1.1 Malpractice CMS Hospital Professional Liability Insurance Premium Index 1.1 All Other Products and Services 25.0 All Other Products 11.7 Pharmaceuticals PPI for Pharmaceuticals for human use, prescription 4.8 Food: Direct Purchases PPI for Processed Foods and Feeds 1.4 Food: Contract Services CPI

- U for Food Away From Home 0.9 Chemicals Blend of Chemical PPIs 0.6

Medical Instruments Blend of the PPI for Surgical and medical instruments and PPI for Medical and s urgical appliances and supplies 1.9 Rubber & Plastics PPI for Rubber and Plastic Products 0.5 Paper and Printing Products PPI for Converted Paper and Paperboard Products 1.0 Miscellaneous Products PPI for Finished Goods Less Food and Energy 0.7 All Other Services 13.3 Labor
- Related Services 6.7
Professional Fees: Labor

- related ECI for Total compensation for Private industry workers in Professional and related 2.9 Administrative and Facilities Support Services ECI for Total compensation for Private industry workers in Office and administrative support 0.7 Installation, Maintenance , and Repair ECI for Total compensation for Civilian workers in Installation, maintenance, and repair 1.6
All Other: Labor

- related Services ECI for Total compensation for Private industry workers in Service occupations 1.5 Nonlabor
- Related Services 6.6
Professional Fees: Nonlabor

- related ECI for Total compensation for Private industry workers in Professional and related 2.6
Financial ser vices ECI for Total compensation for Private industry workers in Financial activities 2.3 Telephone Services CPI

- U for Telephone Services 0.6 All Other: Nonlabor

- related Services CPI

- U for All Items Less Food and Energy 1.1 Capital
- Related Costs 7.0 Depreciation 5.2

Fixed Assets BEA chained price index for nonresidential construction for hospitals and special care facilities

- vintage weighted (23 years) 3.7 Movable Equipment PPI for machinery and equipment

- vintage weighted (11 years) 1.5 Interest Costs 1.2CMS

- 1627

- P 64

Government/Nonprofit Average yield on domestic municipal bonds (Bond Buyer 20 bonds)

- vintage weighted (23 years) 1.0
For Profit Average yield on Moody's Aaa bonds

- vintage weighted (23 years) 0.2 Other Capital
- Related Costs CPI

- U for Rent of primary residence 0.6 Note: Totals may not sum to 100.0 percent due to rounding 4. Proposed FY 2016 Market Basket Update
For FY 2 016 (that is, beginning October 1, 2015 and ending September 30, 2016), we are proposing to use an estimate of the proposed 2012

- based IPF market basket increase factor to update the IPF PPS base payment rate. Consistent with historical practice, we estimate the market basket update for the IP F PPS based on IHS Global Insight’s forecast using the most recent available data. IHS Global Insight (IGI), Inc. is a nationally recognized economic and financial forecasting firm that contracts wi th CMS to forecast the components of the market baskets and multifactor productivity (MFP)

. Based on IGI’s first quarter 201 5 forecast with historical data through the fourth quarter of 2014, the projected proposed 2012

- based IPF market basket increase fa ctor for FY 2016 is 2. 7 percent. Therefore, consistent with our historical practice of estimating market basket increases based on the best available data, we are proposing a market basket increase factor of 2. 7 percent for FY 2016. We are also proposing that if more recent data are subsequently available (for example, a more recent estimate of the market basket) we would use such data, to determine the FY 2016 update in the final rule. For comparison, the current 2008

- based RPL market basket is projected to increase by 2.8 percent in FY 2016 based on IGI’s first quarter 201 5 forecast. Table 13 compares the proposed 2012

- based IPF market basket and the 2008

- based RPL market basket percent changes.CMS

- 1627

- P 65

TABLE 13: Proposed 2012
- Based IPF Ma rket basket and 2008
- Based RPL Market Basket Percent Changes, FY 20 1 0 through FY 201 8 Fiscal Year (FY) Proposed 2012
- Based IPF Market Basket Index Percent Change 2008
- Based RPL

Market Basket Index Percent Change
Historical data: FY 2010 2.0 2.2 FY 2011 2.2 2.5 FY 2012 1.9 2.2 FY 201 3 2.0 2.1 FY 2014 1.9 1.8 Average 2010

- 2014 2.0 2.2 Forecast: FY 2015 2.0 2. 2 FY 2016 2. 7 2.8 FY 2017 3.0 3.0 FY 2018 3. 0 3.1 Average 2015

- 2018 2.7 2.8 Note : T hese market basket percent changes do not include any further adjustments as may be statutorily required. Source: IHS Global Insight, Inc. 1st quarter 201 5 forecast. For FY 2016, the proposed 2012

- based IPF market basket update (2. 7 percent) is one tenth of a percentage point lower than the 2008

- based RPL market basket (2.8 percent). The 0. 1 percentage point difference stems from the lower Pharmaceuticals cost weight in the proposed
2012

- based IPF market basket (4.8 percent) compar ed to the 2008

- based RPL market basket (6.5 percent) as well as from the use of the blended price proxies for the Wages and Salaries and Employee Benefits cost categories.
5. Proposed Productivity Adjustment Section 1886(s)(2)(A)(i) of the Act requires the application of the productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act to the IPF PPS for the RY beginning in 2012 (that is, a RY that coincides with a FY) and each subsequent RY. The statute defines the productivity adjustm ent to be equal to the 10

- year moving average of changes in annual economy

- wide private nonfarm business multifactor productivity (MFP) (as projected by the Secretary for the 10

- year period ending with the applicable FY, year, cost reporting period, or oth er annual period) (the “MFP adjustment”). T he Bureau of Labor Statistics (BLS) publishesCMS

- 1627

- P 66

the official measure of private non

- farm business MFP. We refer readers to the BLS w eb site at http://www.bls.gov/mfp for the BLS historical published MFP data. MFP is derived by subtracting the contribution of labor and capital inputs growth from output growth. The projection s of the components of MFP are currently produced by IGI , a nationally recognized economic forecasting firm with which CMS contracts to forecast the components of the market baskets and MFP

. As described in the FY 2012 IPPS/LTCH final rule (76 FR 51690 through 51692), i n order to generate a forecast of MFP, IGI replicated the MFP measure calcul ated by the BLS using a series of proxy variables derived from IGI’s U.S.
macroeconomic models. In the FY 2012 rule, we identified each of the major MFP component series employed by the BLS to measure MFP as well as provided the corresponding concepts det ermined to be the best available proxies for the BLS series. Beginning with the FY 2016 rulemaking cycle, the MFP adjustment is calculated using a revised series developed by IGI to proxy the aggregate capital inputs. Specifically, IGI has replaced the R eal Effective Capital Stock used for Full Employment GDP with a forecast of BLS aggregate capital inputs recently developed by IGI using a regression model. This series provides a better fit to the BLS capital inputs , as measured by the differences betwee n the actual BLS capital input growth rates and the estimated model growth rates over the historical time period. Therefore, we are using IGI’s most recent forecast of the BLS capital inputs series in the MFP calculations beginning with the FY 2016 rulema king cycle

. A complete description of the MFP projection methodology is available on our website at http://www.cms.gov/Research

Statistics

- Data

- and

- Systems/Statistics

- Trends

- and

Reports/MedicareProgramRatesStats/MarketBasketResearch.html

. Although we discuss the IGI changes to the MFP proxy series in this proposed rule, in the future, when IGI makes cha nges toCMS

- 1627

- P 67

the MFP methodology, we will announce them on our website rather than in the annual rulemaking. Using IGI’s first quarter 201 5 forecast, the MF P adjustment for FY 2016 (the 10

- year moving average of MFP for the period ending FY 2016) is projected t o be 0.6 percent. Thus, in accordance with section 1886(s)(2)(A)(i) of the Act, we propose to base the FY 2016 market basket update, whi ch is used to determine the applicable percentage increase for the IPF payments, on the most recent estimate of the prop osed 2012

- based IPF market basket (currently estimated to be 2. 7 percent based on IGI’s first quarter 201 5 forecast). We propose to then reduce this percent age increase by the current estimate of the MFP adjustment for FY 201 6 of
0.6 percentage point (the 10

- year moving average of M FP for the period ending FY 2016 b ased on IGI’s first quarter 201 5 forecast). Furthermore, we also propose that if more recent data are subsequently available (for example, a more recent estimate of the market basket and MFP ad justment), we would use such data to determine the FY 2016 market basket update and MFP adjustment in the final rule. Section 1886(s)(2)(A)(ii) of the Act requires the application of an “other adjustment” that reduces any update to an IPF PPS base rate by percentages specified in section 1886(s)(3) of the Act for the RY beginning in 2010 through the RY beginning in 2019. For the RY beginning in 2015 (that is, FY 2016), section 1886(s)(3)(D) of the Act requires the reduction to be 0.2 percentage point. We are proposing to implement the productivity adjustment and ‘other adjustment’ in this FY 2016 IPF PPS proposed rule. We invite public comment on these proposals.
6

. Proposed Labor

- related Share Due to variations in geographic wage levels and other labor

- related costs, we believe thatCMS

- 1627

- P 68

payment rates under the IPF PPS should continue to be adjusted by a geographic wage index, which would apply to the labor

- related portion of the Federal per diem bas e rate (hereafter referred to as the labor

- related share). The labor

- related share is determined by identifying the national average proportion of total costs that are related to, influenced by, or vary with the local labor market. We continue to classif y a cost category as labor

- related if the costs are labor

intensive and vary with the local labor market. As stated in the FY 2015 IPF PPS final rule (79 FR 45943), the labor

- related share was defined as the sum of the relative importance of Wages and Sal aries, Employee Benefits, Professional Fees: Labor

- Related Services, Administrative and Facilities Support Services, All Other: Labor

- related Services, and a portion of the Capital Costs from the 2008

- based RPL market basket. Based on our definition of t he labor

- related share and the cost categories in the proposed
2012

- based IPF market basket, we are proposing to include in the labor

- related share the sum of the relative importance of Wages and Salaries, Employee Benefits, Professional Fees: Labor

Relat ed, Administrative and Facilities Support Services, Installation, Maintenance, and Repair, All Other: Labor

- related Services, and a portion of the Capital

- Related cost weight from the proposed 2012

- based IPF market basket. As noted in Section III.A.3.b.i of this proposed rule, for the proposed 2012

- based IPF market basket, we have created a separate cost category for Installation, Maintenance and Repair services. These expenses were previously included in the “All Other” Labor

- related Services cost categ ory in the 2008

- based RPL market basket, along with other services, including but not limited to janitorial, waste management, security, and dry cleaning / laundry services. Because these services tend to be labor

- intensive and are mostly performed at the facility (and, therefore, unlikely to be purchased in the national market), we continue to believe that they meet our definition of labor

- related services.CMS

- 1627

- P 69

Similar to the 2008

- based RPL market basket, the proposed 2012

- based IPF market basket includes 2 c ost categories for nonmedical Professional fees (including but not limited to, expenses for legal, accounting, and engineering services). These are Professional Fees: Labor

related and Professional Fees: Nonlabor

- related. For the proposed 2012

- based IPF m arket basket, we propose to estimate the labor

- related percentage of non

- medical professional fees (and assign these expenses to the Professional Fees: Labor

- related services cost category) based on the same method that was used to determine the labor

- rela ted percentage of professional fees in the 2008

- based RPL market basket. To summarize, the professional services survey found that hospitals purchase the following proportion of these four services outside of their local labor market:

• 34 percent of accounting and auditing services.

• 30 percent of engineering services.

• 33 percent of legal services.

• 42 percent of management consulting services. We applied each of these percentages to the respective Benchmark I

– O cost category underlying the professional fees cost category to determine the Professional Fees: Nonlabor

related costs. The Professional Fees: Labor

- related costs were determined to be the difference between the total costs for each Benchmark I

– O category and the Professional Fees: Nonlabor

related costs. This is the same methodology that we used to separate the 2008

- based RPL market basket professional fees category into Professional Fees: Labor

- related and Professional Fees: Nonlabor

- related cost categories. For more detail regar ding this methodology see the FY 2012 IPF final rule (76 FR 26445). In addition to the professional services listed above, we also classified expenses underCMS

- 1627

- P 70

NAICS 55, Management of Companies and Enterprises, into the Professional Fees cost category

as was done in the 2008

- based RPL market basket. The NAICS 55 data are mostly comprised of corporate, subsidiary, and regional managing offices, or otherwise referred to as home offices. Since many facilities are not located in the same geographic area as their home office, we analyzed data from a variety of sources in order to determine what proportion of these costs should be appropriately included in the labor

- related share. For the 2012

- based IPF market basket, we are proposing to derive the home office per centages using data for both freestanding IPF providers and hospital

- based IPF providers. In the 2008

- based RPL market basket, we used the home office percentages based on the data reported by freestanding IRFs, IPFs, and LTCHs. Using data primarily from the Medicare cost reports and the Home Office Medicare Records (HOMER) database that provides the address (including city and state) for home offices, we were able to determine that 36 percent of the total number of freestanding and hospital

- based IPFs th at had home offices had those home offices located in their respective local labor markets

— defined as being in the same Metropolitan Statistical Area (MSA). The Medicare cost report requires hospitals to report their home office provider numbers. Using the HOMER database to determine the home office location for each home office provider number, we compared the location of the provider with the location of the hospital’s home office. We then placed providers into one of the following 2 groups:

• Group 1

— Provider and home office are located in different MSAs.

• Group 2

— Provider and home office are located in the same MSA. We found that 64 percent of the providers with home offices were classified into Group 1 (that is, different MSA) and, thus, these providers were determined to not be located in the same local labor market as their home office. We found that 36 percent of all providers with homeCMS

- 1627

- P 71

offices were classified into Group 2 (that is, the same MSA). Given these results, we are proposing to cla ssify 36 percent of the Professional Fees costs into the Professional Fees: Labor

related cost category and the remaining 64 percent into the Professional Fees: Nonlabor

- related Services cost category. This methodology for apportioning the Professional Fe e expenses between labor

- related and nonlabor

- related categories i s similar to the method used in the 2008

- based RPL market basket ( see 76 FR 26445). Using this proposed method and the IHS Global Insight, Inc. 4th quarter 2014 forecast for the proposed 2012

- based IPF market basket, the proposed IPF labor

- related share for FY 2016 is the sum of the FY 2016 relative importance of each labor

- related cost category. The relative importance reflects the different rates of price change for these cost categori es between the base year (FY 2012) and FY 2016. Table 14 shows the proposed FY 2016 labor

- related share using the proposed 2012

- based IPF market basket relative importance and the FY 2015 labor

- related share using the 2008

- based RPL market basket. The sum of the relative importance for FY 2016 operating costs (Wages and Salaries, Employee Benefits, Professional Fees: Labor

- related, Administrative and Facilities Support Services, Installation Maintenance & Repair Services, and All Other: Labor

- related Servi ces) is
71. 8 percent, as shown in Table 1 4

. We are proposing to specify the labor

- related share to one decimal place, which is consistent with the IPPS labor

- related share (currently the Labor

- related share from the RPL market basket is specified to 3 dec imal places). We are proposing that the portion of Capital that is influenced by the local labor market is estimated to be 46 percent, which is the same percentage applied to the 2008

- based RPL market basket. Since the relative importance for Capital

- Rela ted Costs is 6.8 percent of the proposed
2012

- based IPF market basket in FY 2016, we are proposing to take 46 percent of 6.8 percent toCMS

- 1627

- P 72

determine the proposed labor

- related share of Capital for 2016. The result would be 3.1 percent, which we propose to ad d to 71. 8 percent for the operating cost amount to determine the total proposed labor

- related share for FY 2016. The FY 2016 labor

- related share using the proposed 2012

- based IPF market basket is about five percentage points higher than the FY 2015 labor

- r elated share using the 2008

- based RPL market basket. Of the five percentage point difference, 3 percentage points is attributable to the higher Wages and Salaries and Employee Benefits cost weights in the 2012

- based IPF market basket compared to the 2008

- based RPL market basket, while 2 percentage points is attributable to the higher weight associated with the labor

- related services cost categories. We would note that the higher Wages and Salaries cost weight in the 2012

- based IPF market basket relative t o the 2008

- based RPL market basket is the result of freestanding IPFs having a larger percentage of costs attributable to labor than freestanding IRFs and Long

- term care hospitals. These latter facilities were included in the 2008

- based RPL market basket. Table 14: Proposed 2016 IPF Labor
- Related Share FY 2016 L abor
related S hare based on Proposed 2012
- based IP F Market Basket 1 FY 2015

Final Labor
r elated Share 2 Wages and Salaries 51. 7 48.271 Employee Benefits 13.4 12.936 Professional Fees: Labor

- related 2.9 2.058 Administrative and Facilities Support Services 0.7 0.415 Installation, Maintenance and Repair 1.6

- All Other: Labor

- related Services 1.5 2.061 Subtotal 71. 8 65.741 Labor

- related portion of capital (46%) 3.1 3.553 Total LRS 74. 9 69.294 1 IHS Global Insight, Inc. 4th quarter 2014 forecast. 2 Federal Register 79

- FR

- 45943CMS

- 1627

- P 73

In weighing the effects of the change in the LRS, we considered whether to recommend a
2

- year transitional implementation of the increase in the LRS . We recognize that IPFs with wage index values of less than one would be adversely affected by an increas ed LRS, as a larger share of the base rate would be adjusted by the wage index value

. About 69 percent of IPFs would have wage index values of less than one using FY2015 CBSA data, and 30 percent of these providers are rural. While the LRS would be upda ted in a budget neutral fashion so that the overall impact on payments is zero, there would still be distributional effects on specific categories of IPFs. W e considered the distributional effects of the multiple proposals made in this proposed rule, including the proposal to update the full LRS in FY 2016, and we found that the negative impact of updating the LRS in a single year , without a transition , was relatively small , as shown in Table 2 6 in section VII

. of this proposed rule. Additionally, we are proposing 2 other adjustments to benefit providers: a transitional wage index and a phase

- out of the 17 percent rural adjustment for the 37 IPFs that would change from rural to urban status due to the new CBSA delineations

. As presented in section III.A.6

. of this proposed rule, we are proposing to use the 2012

- based IPF market basket relative importance’s to determine the FY 2016 IPF LRS. We be lieve this is technically appropriate as it is based on more recent, provider

specific data for IPFs. For all of these reasons , we propose to implement the full LRS in FY
2016 , but solicit comments on this issue.
B. Proposed Updates to the IPF PPS for FY 201 6 ( Beginning October 1, 201 5 ) The IPF PPS is based on a standardized Federal per diem base rate calculated from the IPF average per diem costs and adjusted for budget

- neutrality in the implementation year. The Federal per diem base rate is used as the standard payment per day under the IPF PPS and is adjusted by the pati ent

- level and facility

- level adjustments that are applicable to the IPF stay. ACMS

- 1627

- P 74

detailed explanation of how we calculated the average per diem cost appears in the November
2004 IPF PPS final rule (69 FR 66926).
1 . Determining the Standardized Budget

- Neutral Federal Per Diem Base Rate Section 124(a)(1) of the BBRA required that we implement the IPF PPS in a budget

neutral manner. In other words, the amount of total payments under the IPF PPS, including any payment adjustments, must be projected to be equal to the amount of total payments that would have been made if the IPF PPS were not implemented. Therefore, we calculated the budget

- neutrality factor by setting the total e stimated IPF PPS payments to be equal to the total estimated payments that would have been made under the Tax Equity and Fiscal Responsibilit y Act of 1982 (TEFRA) (Pub. L. 97

- 248) methodology had the IPF PPS not been implemented. A step

- by

- step descriptio n of the methodology used to estimate payments under the TEFRA payment system appears in the November 2004 IPF PPS final rule (69 FR 66926). Under the IPF PPS methodology, we calculated the final Federal per diem base rate to be budget

- neutral during the IPF PPS implementation period (that is, the 18

- month period from January 1, 2005 through June 30, 2006) using a July 1 update cycle. We updated the average cost per day to the midpoint of the IPF PPS implementation period (that is, October 1, 2005), and this amount was used in the payment model to establish the budget

- neutrality adjustment. Next, we standardized the IPF PPS Federal per diem base rate to account for the overall positive effects of the IPF PPS payment adjustment factors by dividing total estimated payments under the TEFRA payment system by estimated payments under the IPF PPS. Additional information concerning this standardization can be found in the November 2004 IPF PPS final rule (69 FR 66932) and the RY 2006 IPF PPS final rule (71 FR 27045). We then reduced the standardized Federal per diem base rate to account for the outlier policy, the stop loss provision,CMS

- 1627

- P 75

and anticipated behavioral changes. A complete discussion of how we calculated each component of the budget

- neutrality adjust ment appears in the November 2004 IPF PPS final rule (69 FR 66932 through 66933) and in the May 2006 IPF PPS final rule (71 FR 27044 through 27046). The final standardized budget

- neutral Federal per diem base rate established for cost reporting periods be ginning on or after January 1, 2005 was calculated to be $575.95. The Federal per diem base rate has been updated in accordance with applicable statutory requirements and § 412.428 through publication of annual notices or proposed and final rules. A det ailed discussion on the standardized budget

- neutral Federal per diem base rate and the electroconvulsive therapy (ECT) rate appears in the August 2013 IPF PPS update notice (78 FR 46738 through 46739). These documents are available on the CMS website at http://www.cms.hhs.gov/InpatientPsychFacilPPS/

. 2

. Proposed FY 201 6 Update of the Federal Per Diem Base Rate and Electroconvulsive Therapy (ECT) Rate The current (that is , FY 201 5 ) Federal per diem base rate is $ 728.31 and the ECT rate is $ 313.55

. For FY 201 6 , we are pro posing to apply an update of 1. 9 percent (that is , the proposed
FY 2012

- based IPF

- specific market basket increase for FY 201 6 of 2. 7 percent less the proposed productivity adjustment of 0. 6 percentage point , and further reduced by the 0. 2 percentage point required under section1886(s)(3)( D ) of the Ac t ) , and the wage index budget

- neutrality factor of
1. 00 41 (as discussed in section III.D.1. e . of this proposed ru le) to the F Y 201 5 Federal per diem base rate of $ 728.31 , yielding a proposed Federal per diem base rate of $ 745.19 for FY 201 6

. Similarly, we are proposing to apply the 1. 9 percent payment update and the 1. 00 41 wage index budget

- neutrality factor to the F Y 201 5 ECT rate, yielding a proposed ECT rate of $ 320. 82 for
FY 201 6

.CMS

- 1627

- P 76

As noted above, s ection 1886(s)(4) of the Act requires the establishment of a quality data reporting program for the IPF PPS beginning in RY 201 5

. We refer reader s to section V. of this proposed rule for a discussion of the IPF Quality Reporting Program. Section 1886(s)(4)(A)(i) of the Act requires that, for RY 2014 and each subsequent rate year, the Secretary shall reduce any annual update to a standard Federal rate for discharges occurring during the rate year by 2.0 percentage points for any IPF that does not comply with the quality data submission requirements with respect to an applicable year. Therefore, we are proposing to apply a 2.0
pe rcentage point reduction to the F ederal per diem base rate and the ECT rate as follows : For IPFs that fail ed to submit quality reporting data under the IPFQR program, we would apply a

- 0. 1 percent annual update (that is , 1. 9 percent reduced by 2 percentage points , in accordance with section 1 886(s)(4)(A)(ii) of the Act) and the wage index budget

- neutrality factor of 1. 00 41 to the FY 2015 Federal per diem base rate of $ 728.31 , yielding a Fed e ral per diem base rate of $ 730.56 for FY 201 6

. Similarly, we would apply the

- 0. 1 percent annual update and the 1. 00 41 wage index budget

- neutrality factor to the FY 2015 ECT rate of $ 313.55 , yielding an ECT rate of $ 314.52 for FY 201 6

. C

. Proposed Update s to the IPF PPS Patient

- Level Adjustment Factors
1 . Overview of the IPF PPS Adjustment Factors The IPF PPS payment adjustments were derived from a regression analysis of 100 percent of the FY 2002 MedPAR data file, which contained 483,038 cases. For a more detailed description of the data file used for the regression analysis, s ee the November 2004 IPF PPS final rule (69 FR 66935 through 66936). While we have since used more recent claims data to simulate payments to set the fixed dollar loss threshold amount for the outlier policy and toCMS

- 1627

- P 77

assess the impact of the IPF PPS updates , we continue to use the regression

- derived adjustment factors established in 2005 for F Y 201 6

. 2

. IPF PPS Patient

- Level Adjustments The IPF PPS includes payment adjustments for the following patient

- level characteristics: Medicare Severity D iagnosis R elated G roups (MS

– DRGs) assignment of the patient’s principal diagnosis, selected comorbidities, patient age, and the variable per diem adjustments.

a . MS

- DRG Assignment We believe it is important to maintain the same diagnostic coding and DRG classification for IPFs that are used under the IPPS for providing psychiatric care. For this reason, when the IPF PPS was implemented for cost reporting periods beginning on or after January 1, 2005, we adopted the same diagnostic code set (ICD

- 9

- CM) and DRG patient classification system (that is, the CMS DRGs) that were utilized at the time under the IPPS. In the May 2008 IPF PPS notice (73 FR 25709), we discussed CMS’ s effort to better recognize resource use and the severity of illness among patients. CMS adopted the new MS

- DRGs for the IPPS in the FY 2008 IPPS final rule with comment period (72 FR 47130). In the 2008 IPF PPS notice (73 FR 25716) , we provided a crosswalk to reflect changes that were made under the IPF PPS to adopt the new MS

DRGs. Fo r a detailed description of the mapping changes from the original DRG adjustment categories to the current MS

- DRG adjustment categories, we refer readers to the May 2008 IPF PPS notice (73 FR 25714). The IPF PPS includes payment adjustments for designated psychiatric DRG s assigned to the claim based on the patient’s principal diagnosis. The DRG adjustment factors were expressed relative to the most frequently reported psychiatric DRG in FY 2002, that is, DRG 430 (psychoses). The coefficient values and ad justment factors were derived from the regressionCMS

- 1627

- P 78

analysis. Mapping the DRGs to the MS

- DRGs resulted in the current 17 IPF

- MS

- DRGs, instead of the original 15 DRGs, for which the IPF PPS provides an adjustment. For the FY 201 6 update, we are not proposing any changes to the IPF MS

- DRG adjustment factors. In FY 2015 rulemaking (79 FR 45945 through 45947), we proposed and finalized conversions of the ICD

- 9

- CM

- based MS

- DRGs to ICD

- 10

- CM/PCS

- based MS

- DRGs, which will be implemented on October 1, 2015 . Further information for the ICD

- 10

- CM /PCS
MS

- DRG conversion project can be found on the CMS ICD

- 10

- CM web site at http://www.cms.hhs.gov/Medicare/Coding/I CD10/ICD

- 10

- MS

- DRG

- Conversion

- Project.html

. For FY 2016, we propose to continue to make a payment adjustment for psychiatric diagnoses that group to one of the existing 17 MS

- IPF

- DRGs listed in the Addendum

. Psychiatric principal diagnoses that do not gro up to one of the 17 designated DRGs would still receive the Federal per diem base rate and all other applicable adjustments, but the payment would not include a DRG adjustment. As noted above, t he diagnoses for each IPF MS

- DRG will be updated on October 1,
201 5 , using the ICD

- 10

- CM/PCS code set s . b . Payment for Comorbid Conditions The intent of the comorbidity adjustments is to recognize the increased costs associated with comorbid conditions by providing additional payments for certain concurrent medi cal or psychiatric conditions that are expensive to treat. In the May 2011 IPF PPS final rule (76 FR 26451 through 26452), we explained that the IPF PPS includes 17 comorbidity categories and identified the new, revised, and deleted ICD

- 9

- CM diagnosis cod es that generate a comorbid condition payment adjustment under the IPF PPS for RY 2012 (76 FR 26451). Comorbidities are specific patient conditions that are secondary to the patient’s principalCMS

- 1627

- P 79

diagnosis and that require treatment during the stay. Diagn oses that relate to an earlier episode of care and have no bearing on the current hospital stay are excluded and must not be reported on IPF claims. Comorbid conditions must exist at the time of admission or develop subsequently, and affect the treatment received, length of stay (LOS), or both treatment and LOS. For each claim, an IPF may receive only one comorbidity adjustment within a comorbidity category, but it may receive an adjustment for more than one comorbidity category. Current b illing instructi ons for claims for discharges on or after October 1, 2015 require IPFs to
enter the complete ICD

- 10

- CM codes for up to 24 additional diagnoses if they co

- exist at the time of admission , or develop subsequently and impact the treatment provided. The comorbidity adjustments were determined based on the regression analysis using the diagnoses reported by IPFs in FY 2002. The principal diagnoses were used to establish the DRG adjustments and were not accounted for in establishing the comorbidity categor y adjustments, except where ICD

- 9

- CM “code first” instructions apply. As we explained in the May 2011 IPF PPS final rule (76 FR 265451), the “ code first ” rule applies when a condition has both an underlying etiology and a manifestation due to the underlyi ng etiology. For these conditions,
ICD

- 9

- CM has a coding convention that requires the underlying conditions to be sequenced first followed by the manifestation. Whenever a combination exists, there is a “use additional code” note at the etiology code and a “ code first ” note at the manifestation code. The same principle holds for ICD

- 10

- CM as for ICD

- 9

- CM. Whenever a combination exists, there is a “use additional code” note in the ICD

- 10

- CM codebook pertaining to the etiology code, and a “code first” code pertaining to the manifestation code. In the F Y 2015 IPF PPS final rule, we provided a “code first” table for reference that highlights the same or similar manifestation codes where the “ code first ” instructions apply in ICD

- 10

- CM that were present inCMS

- 1627

- P 80

ICD

- 9

- CM (79 FR 46009)

. As noted previously, i t is our policy to maintain the same diagnostic coding set for IPFs that is used under the IPPS for providing the same psychiatric care. T he 17 comorbidity categories formerly defined using ICD

- 9

- CM codes were converted to ICD

- 10

- CM/PCS in the
FY 2015 IPF PPS final rule (79 FR 45947 to 45955)

. The goal for converting the comorbidity categories is referred to as replication, meaning that the payment adjustment for a given patient encounter is the same after ICD

- 10

- CM implementation as it would be if the sam e record had been coded in ICD

- 9

- CM and submitted prior to ICD

- 10

- CM/PCS implementation on October 1 , 2015 . All conversion efforts were made with the intent of achieving this goal. We are not proposing any refinements to the comorbidity adjustments at this time, and propose to continue to use the existing adjustments in effect in FY 2015 . The FY 2016 comorbidity adjustments are found in the Addendum to this proposed rule

. 3. Patient Age Adjustments As explained in the November 2004 IPF PPS final rule (69 FR 66922), we analyzed the impact of age on per diem cost by examining the age variable (that is, the range of ages) for payment adjustments. In general, we found that the cost per day increases with age. The older age groups are more costly than the under 45 age group, the differences in per diem cost increase for each successive age group, and the differences are statistically significant.
F or FY 201 6 , we are proposing to continu e to use the patient age adjustments currently in effect in FY 2015 , as shown in the Addendum to this proposed rule

. 4. Variable Per Diem Adjustments We explained in the November 2004 IPF PPS final rule (69 FR 66946) that the regression analysis indicated that per diem cost declines as the LOS increases. The variable per diemCMS

- 1627

- P 81

adjustments to the Federal per diem base rate account for ancillary and admin istrative costs that occur disproportionately in the first days after admission to an IPF. We used a regression analysis to estimate the average differences in per diem cost among stays of different lengths. As a result of this analysis, we established variable per diem adjustments that begin on day 1 and decline gradually until day 21 of a patient's stay. For day 22 and thereafter, the variable per diem adjustment remains the same each day for the remainder of the stay. However, the adjustment applied to day 1 depends upon whether the IPF has a qualifying emergency department ( ED ) . If an IPF has a qualifying ED, it receives a 1.31 adjustment factor for day 1 of each stay. If an IPF does not have a qualifying ED, it receives a 1.19 adjustment factor f

or day 1 of the stay. The ED adjustment is explained in more detail in section III.D. 4

. of this proposed rule.
For FY 201 6 , we propos e to continu e to use the variable per diem adjustment factors currently in effect as shown in the Addendum to this propo sed rule . A complete discussion of the variable per diem adjustments appears in the November 2004 IPF PPS final rule (69 FR 66946).
D

. Proposed Updates to the IPF PPS Facility

- Level Adjustments The IPF PPS includes facility

- level adjustments for the wage index, IPFs located in rural areas, teaching IPFs, cost of living adjustments for IPFs located in Alaska and Hawaii, and IPFs with a qualifying ED.
1. Proposed Wage Index Adjustment

a. Backg round As discussed in the May 2006 IPF PPS final rule (71 FR 27061 ) and in the May 2008 (73
FR 25719 ) and May 2009 IPF PPS notices (74 FR 20373 ) , in order to provid e an adjustment forCMS

- 1627

- P 82

geographic wage levels, the labor

- related portion of an IPF's payment is adjusted using an appropriate wage index. Currently, an IPF's geographic wage index value is determined based on the actual location of the IPF in an urban or rural area as defined in §412.64(b)(1)(ii)(A) and ( C). b. Proposed Wage Index for FY 201 6 Since the inception of the IPF PPS, we have used the pre

- floor , pre - reclassified acute care hospital wage index in developing a wage index to be applied to IPFs because t here is not an
IPF

- specific wage index available . W e believe that IPFs generally compete in the same labor market s as acute care hospitals , so the pre - floor , pre - reclassified hospital wage index should reflect IPF labor costs. As discussed in the May 2006 IPF PPS final rule for FY 2007 (71 FR
27061 through 27067), under the IPF PPS, t he wage index is calculated using the IPPS wage index for the labor market area in which the IPF is located, without taking into account geographic reclassifications, floors, and other adjustments made to the wage index under the IPPS. For a complete desc ription of these IPPS wage index adjustments, please see the CY 2013
IPPS/ LTCH PPS final rule (77 FR 53365 through 53374). For FY 2016, w e are proposing to continue to apply the most recent hospital wage index (that is, the FY 201 5 pre - floor, pre

reclassi fied hospital wage index , which is the most appropriate index as it best reflects the variation in local labor costs of IPFs in the various geographic areas) using the most recent hospital wage data (that is, data from hospital cost reports for the cost re porting period beginning during FY 2011 ) without any geographic reclassifications, floors, or other adjustments. We propose to apply the FY 2016 IPF PPS wage index to payments beginning October 1, 2015. We apply the wage index adjustment to the labor

- rela ted portion of the Federal rate, which we are propos ing to change from 69. 294 percent to 74. 9 percent in FY 2016 . ThisCMS

- 1627

- P 83

percentage reflects the labor

- related relative importance of the FY 20 12

- based proposed IPF

specific market basket for FY 201 6 (see section III.A .6

. of this proposed rule ).

c . OMB Bulletins and Proposed Transitional Wage Index OMB publishes bulletins regarding CBSA changes, including changes to CBSA numbers and titles. In the May 2006 IPF PPS final rule for RY 2007 (71 FR 270 61 through 27067 ), we adopted the changes discussed in the Office of Management and Budget (OMB) Bulletin No.
03

- 04 (June 6, 2003), which announced revised definitions for Metropolitan Statistical Areas (MSAs), and the creation of Micropolitan Statistical Areas and Combined Statistical Areas. In adopting the OMB CBSA geographic designations in RY 2007 , we did not provide a separate transition for the CBSA

- based wage index since the IPF PPS was already in a transition period from TEFRA payments to PPS paym ents. In the May 2008 IPF PPS notice, we incorporated the CBSA nomenclature changes published in the most recent OMB bulletin that applies to the hospital wage index used to determine the current IPF PPS wage index and stated that we expect to continue to do the same for all the OMB CBSA nomenclature changes in future IPF PPS rules and notices, as necessary (73 FR 25721). The OMB bulletins may be accessed online at http://www.whitehouse.g ov/omb/bulletins_default/

. In accordance with our established methodology, we have historically adopted any CBSA changes that are published in the OMB bulletin that corresponds with the hospital wage index used to determine the IPF PPS wage index. For the FY 201 5 IPF wage index , we use d the FY
2014 pre - floor, pre

- reclassified hospital wage index to adjust the IPF PPS payments. On February 28, 2013, OMB issued OMB Bulletin No. 13

- 01, which established revised delineations for Metropolitan Statistical Areas , Micropolitan Statistical Areas, and CombinedCMS

- 1627

- P 84

Statistical Areas, and provided guidance on the use of the delineations of these statistical areas. A copy of this bulletin may be obtained at http://www.whitehouse.gov/omb/bulletins_default/

. Because the FY 201 4 pre - floor, pre

- reclassified hospital wage index was finalized prior to the issuance of this Bulletin, the FY 201 5 IPF PPS wage index, which was based on the FY 2014
pre - floor, pre

- reclassified hospital wage index , d id not reflect OMB’s new area delineations
based on the 2010 Census

. According to OMB, “[t]his bulletin provides the delinea tions of all Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan Statistical Areas, Combined Statistical Areas, and New England City and Town Areas in the United States and Puerto Rico based on the standards published on June 28, 2010, in the Federal Register (75 FR 37246 through 37252) and Census Bureau data.” T he se OMB Bulletin changes are reflected in the FY
201 5 pre

- floor, pre

- reclassified hospital wage index , upon which the FY 201 6 IPPS PPS wage index is based

. We propose to adopt th ese new OMB CBSA delineations in the FY 2016 proposed IPF PPS wage index. We believe that the most current CBSA delineations accurately reflect the local economies and wage levels of the areas where IPFs are located, and we believe that it is important for the IPF PPS to use the latest CBSA delineations available in order to maintain an
up - to

- date payment system that accurately reflects the reality of population shifts and labor market conditions.
In pr oposing adoption of these changes for the IPF PPS, it is necessary to identify the new labor market area delineation for each county and facility in the country. For example, there would be new CBSAs, urban counties that would become rural, rural counties that would become urban, and existing CBSAs that would be split apart. Because the wage index of urban areas is typically higher than that of rural areas, IPF facilities currently located in rural countiesCMS

- 1627

- P 85

that w ould become urban, beginning October 1, 20 1 5 , w ould generally experience an increase in their wage index values. We identified 105 counties and 37 IPFs that w ould move from rural to urban status due to the new CBSA delineations beginning in F Y 201 6 , shown in Table 15

. TABLE 15 : FY 2016 RURAL to URBAN CBSA CROSSWALK

County Name FY 2014 CBSA Delineations/ FY 2015 data FY 2015 CBSA

Delineations/ FY 2015 data Change in value (percent) CBSA Urban/

Rural Wage

Index CBSA Urban/

Rural Wage

Index Baldwin County, Alabama 1 RURAL 0.6963 19300 URBAN 0.7248 4.09% Pickens County, Alabama 1 RURAL 0.6963 46220 URBAN 0.8337 19.73% Cochise County, Arizona 3 RURAL 0.9125 43420 URBAN 0.8937

- 2.06% Little River County, Arkansas 4 RURAL 0.7311 45500 URBAN 0.7362 0.70% Windham County, Connecticut 7 RURAL 1.1251 49340 URBAN 1.1493 2.15% Sussex County, Delaware 8 RURAL 1.0261 41540 URBAN 0.9289

- 9.47% Citrus County, Florida 10 RURAL 0.8006 26140 URBAN 0.7625

- 4.76% Gulf County, Florida 10 RURAL 0.8006 37460 URBAN 0.7906

- 1.25% Highlands County, Florida 10 RURAL 0.8006 42700 URBAN 0.7982

- 0.30% Sumter County, Florida 10 RURAL 0.8006 45540 URBAN 0.8095 1.11% Walton County, Florida 10 RURAL 0.8006 18880 URBAN 0.8156 1.87% Lincoln County, Georgia 11 RURAL 0.7425 12260 URBAN 0.9225 24.24% Morgan County, Georgia 11 RURAL 0.7425 12060 URBAN 0.9369 26.18% Peach County, Georgia 11 RURAL 0.7425 47580 URBAN 0.7542 1.58% Pulaski County, Georgia 11 RURAL 0.7425 47580 URBAN 0.7542 1.58% Kalawao County, Hawaii 12 RURAL 1.0741 27980 URBAN 1.0561

- 1.68% Maui County, Hawaii 12 RURAL 1.0741 27980 URBAN 1.0561

- 1.68% Butte County, Idaho 13 RURAL 0.7398 26820 URBAN 0.8933 20.75% De Witt County, Illinois 14 RURAL 0.8362 14010 URBAN 0.9165 9.60% Jackson County, Illinois 14 RURAL 0.8362 16060 URBAN 0.8324

- 0.45% Williamson County, Illinois 14 RURAL 0.8362 16060 URBAN 0.8324

- 0.45% Scott County, Indiana 15 RURAL 0.8416 31140 URBAN 0.8605 2.25% Union County, Indiana 15 RURAL 0.8416 17140 URBAN 0.9473 12.56% Plymouth County, Iowa 16 RURAL 0.8451 43580 URBAN 0.8915 5.49% Kingman County, Kansas 17 RURAL 0.7806 48620 URBAN 0.8472 8.53% Allen County, Kentucky 18 RURAL 0.7744 14540 URBAN 0.8410 8.60% Butler County, Kentucky 18 RURAL 0.7744 14540 URBAN 0.8410 8.60% Acadia Parish, Louisiana 19 RURAL 0.7580 29180 URBAN 0.7869 3.81% Iberia Parish, Louisiana 19 RURAL 0.7580 29180 URBAN 0.7869 3.81%CMS

- 1627

- P 86

St. James Parish, Louisiana 19 RURAL 0.7580 35380 URBAN 0.8821 16.37% Tangipahoa Parish, Louisiana 19 RURAL 0.7580 25220 URBAN 0.9452 24.70% Vermilion Parish, Louisiana 19 RURAL 0.7580 29180 URBAN 0.7869 3.81% Webster Parish, Louisiana 19 RURAL 0.7580 43340 URBAN 0.8325 9.83% St. Marys County, Maryland 21 RURAL 0.8554 15680 URBAN 0.8593 0.46% Worcester County, Maryland 21 RURAL 0.8554 41540 URBAN 0.9289 8.59% Midland County, Michigan 23 RURAL 0.8207 33220 URBAN 0.7935

- 3.31% Montcalm County, Michigan 23 RURAL 0.8207 24340 URBAN 0.8799 7.21% Fillmore County, Minnesota 24 RURAL 0.9124 40340 URBAN 1.1398 24.92% Le Sueur County, Minnesota 24 RURAL 0.9124 33460 URBAN 1.1196 22.71% Mille Lacs County, Minnesota 24 RURAL 0.9124 33460 URBAN 1.1196 22.71% Sibley County, Minnesota 24 RURAL 0.9124 33460 URBAN 1.1196 22.71% Benton County, Mississippi 25 RURAL 0.7589 32820 URBAN 0.8991 18.47% Yazoo County, Mississippi 25 RURAL 0.7589 27140 URBAN 0.7891 3.98% Golden Valley County, Montana 27 RURAL 0.9024 13740 URBAN 0.8686

- 3.75% Hall County, Nebraska 28 RURAL 0.8924 24260 URBAN 0.9219 3.31% Hamilton County, Nebraska 28 RURAL 0.8924 24260 URBAN 0.9219 3.31% Howard County, Nebraska 28 RURAL 0.8924 24260 URBAN 0.9219 3.31% Merrick County, Nebraska 28 RURAL 0.8924 24260 URBAN 0.9219 3.31% Jefferson County, New York 33 RURAL 0.8208 48060 URBAN 0.8386 2.17% Yates County, New York 33 RURAL 0.8208 40380 URBAN 0.8750 6.60% Craven County, North Carolina 34 RURAL 0.7995 35100 URBAN 0.8994 12.50% Davidson County, North Carolina 34 RURAL 0.7995 49180 URBAN 0.8679 8.56% Gates County, North Carolina 34 RURAL 0.7995 47260 URBAN 0.9223 15.36% Iredell County, North Carolina 34 RURAL 0.7995 16740 URBAN 0.9073 13.48% Jones County, North Carolina 34 RURAL 0.7995 35100 URBAN 0.8994 12.50% Lincoln County, North Carolina 34 RURAL 0.7995 16740 URBAN 0.9073 13.48% Pamlico County, North Carolina 34 RURAL 0.7995 35100 URBAN 0.8994 12.50% Rowan County, North Carolina 34 RURAL 0.7995 16740 URBAN 0.9073 13.48% Oliver County, North Dakota 35 RURAL 0.7099 13900 URBAN 0.7216 1.65%CMS

- 1627

- P 87

Sioux County, North Dakota 35 RURAL 0.7099 13900 URBAN 0.7216 1.65% Hocking County, Ohio 36 RURAL 0.8329 18140 URBAN 0.9539 14.53% Perry County, Ohio 36 RURAL 0.8329 18140 URBAN 0.9539 14.53% Cotton County, Oklahoma 37 RURAL 0.7799 30020 URBAN 0.7918 1.53% Josephine County, Oregon 38 RURAL 1.0083 24420 URBAN 1.0086 0.03% Linn County, Oregon 38 RURAL 1.0083 10540 URBAN 1.0879 7.89% Adams County, Pennsylvania 39 RURAL 0.8719 23900 URBAN 1.0104 15.88% Columbia County, Pennsylvania 39 RURAL 0.8719 14100 URBAN 0.9347 7.20% Franklin County, Pennsylvania 39 RURAL 0.8719 16540 URBAN 1.0957 25.67% Monroe County, Pennsylvania 39 RURAL 0.8719 20700 URBAN 0.9372 7.49% Montour County, Pennsylvania 39 RURAL 0.8719 14100 URBAN 0.9347 7.20% Utuado Municipio, Puerto Rico 40 RURAL 0.4047 10380 URBAN 0.3586

- 11.39% Beaufort County, South Carolina 42 RURAL 0.8374 25940 URBAN 0.8708 3.99% Chester County, South Carolina 42 RURAL 0.8374 16740 URBAN 0.9073 8.35% Jasper County, South Carolina 42 RURAL 0.8374 25940 URBAN 0.8708 3.99% Lancaster County, South Carolina 42 RURAL 0.8374 16740 URBAN 0.9073 8.35% Union County, South Carolina 42 RURAL 0.8374 43900 URBAN 0.8277

- 1.16% Custer County, South Dakota 43 RURAL 0.8312 39660 URBAN 0.8989 8.14% Campbell County, Tennessee 44 RURAL 0.7365 28940 URBAN 0.7015

- 4.75% Crockett County, Tennessee 44 RURAL 0.7365 27180 URBAN 0.7747 5.19% Maury County, Tennessee 44 RURAL 0.7365 34980 URBAN 0.8969 21.78% Morgan County, Tennessee 44 RURAL 0.7365 28940 URBAN 0.7015

- 4.75% Roane County, Tennessee 44 RURAL 0.7365 28940 URBAN 0.7015

- 4.75% Falls County, Texas 45 RURAL 0.7855 47380 URBAN 0.8137 3.59% Hood County, Texas 45 RURAL 0.7855 23104 URBAN 0.9386 19.49% Hudspeth County, Texas 45 RURAL 0.7855 21340 URBAN 0.8139 3.62% Lynn County, Texas 45 RURAL 0.7855 31180 URBAN 0.8830 12.41% Martin County, Texas 45 RURAL 0.7855 33260 URBAN 0.8940 13.81% Newton County, Texas 45 RURAL 0.7855 13140 URBAN 0.8508 8.31% Oldham County, Texas 45 RURAL 0.7855 11100 URBAN 0.8277 5.37% Somervell County, Texas 45 RURAL 0.7855 23104 URBAN 0.9386 19.49% Box Elder County, Utah 46 RURAL 0.8891 36260 URBAN 0.9225 3.76% Augusta County, Virginia 49 RURAL 0.7674 44420 URBAN 0.8326 8.50% Buckingham County, 49 RURAL 0.7674 16820 URBAN 0.9053 17.97%CMS

- 1627

- P 88

Virginia Culpeper County, Virginia 49 RURAL 0.7674 47894 URBAN 1.0403 35.56% Floyd County, Virginia 49 RURAL 0.7674 13980 URBAN 0.8473 10.41% Rappahannock County, Virginia 49 RURAL 0.7674 47894 URBAN 1.0403 35.56% Staunton City County, Virginia 49 RURAL 0.7674 44420 URBAN 0.8326 8.50% Waynesboro City County, Virginia 49 RURAL 0.7674 44420 URBAN 0.8326 8.50% Columbia County, Washington 50 RURAL 1.0892 47460 URBAN 1.0934 0.39% Pend Oreille County, Washington 50 RURAL 1.0892 44060 URBAN 1.1425 4.89% Stevens County, Washington 50 RURAL 1.0892 44060 URBAN 1.1425 4.89% Walla Walla County, Washington 50 RURAL 1.0892 47460 URBAN 1.0934 0.39% Fayette County, West Virginia 51 RURAL 0.7410 13220 URBAN 0.8024 8.29% Raleigh County, West Virginia 51 RURAL 0.7410 13220 URBAN 0.8024 8.29% Green County, Wisconsin 52 RURAL 0.9041 31540 URBAN 1.1130 23.11%
The wage index values of rural areas are typically lower than that of urban areas. Therefore, IPF s located in a county that is currently designated as urban under the IPF PPS wage index that would become rural when we would adopt the new CBSA delineations may experience a decrease in their wage index values. We identified 37 counties and 3 IPFs that

w ould move from urban to rural status due to the new CBSA delineations beginning in F Y 201 6

. Table 16 shows the CBSA delineati ons and the urban wage index values for F Y 2015 based on existing CBSA delineations, compared with the proposed CBSA delineations and wage index values for F Y 201 6 based on the new OMB CBSA delineations . Table 16 also shows the percentage change in these values for those counties that would change from urban to rural, beginning in F Y 201 6 , when we would adopt the new CBSA delineations.CMS

- 1627

- P 89

TABLE 16 : F Y 201 6 URBAN to RURAL CBSA CROSSWALK

County Name FY 2014 CBSA

Delineations/ FY 2015 data FY 2015 CBSA Delineations/ FY 2015 data Change

in value (percent) CBSA Urban/

Rural Wage

Index CBSA Urban/

Rural Wage

Index Greene County, Alabama 46220 URBAN 0.8387 1 RURAL 0.6914

- 17.56% Franklin County, Arkansas 22900 URBAN 0.7593 4 RURAL 0.7311

- 3.71% Power County, Idaho 38540 URBAN 0.9672 13 RURAL 0.7398

- 23.51% Franklin County, Indiana 17140 URBAN 0.9473 15 RURAL 0.8416

- 11.16% Gibson County, Indiana 21780 URBAN 0.8537 15 RURAL 0.8416

- 1.42% Greene County, Indiana 14020 URBAN 0.9062 15 RURAL 0.8416

- 7.13% Tipton County, Indiana 29020 URBAN 0.8990 15 RURAL 0.8416

- 6.38% Franklin County, Kansas 28140 URBAN 0.9419 17 RURAL 0.7779

- 17.41% Geary County, Kansas 31740 URBAN 0.8406 17 RURAL 0.7779

- 7.46% Nelson County, Kentucky 31140 URBAN 0.8593 18 RURAL 0.7748

- 9.83% Webster County, Kentucky 21780 URBAN 0.8537 18 RURAL 0.7748

- 9.24% Franklin County, Massachusetts 44140 URBAN 1.0271 22 RURAL 1.1553 12.48% Ionia County, Michigan 24340 URBAN 0.8965 23 RURAL 0.8288

- 7.55% Newaygo County, Michigan 24340 URBAN 0.8965 23 RURAL 0.8288

- 7.55% George County, Mississippi 37700 URBAN 0.7396 25 RURAL 0.7570 2.35% Stone County, Mississippi 25060 URBAN 0.8179 25 RURAL 0.7570

- 7.45% Crawford County, Missouri 41180 URBAN 0.9366 26 RURAL 0.7725

- 17.52% Howard County, Missouri 17860 URBAN 0.8319 26 RURAL 0.7725

- 7.14% Washington County, Missouri 41180 URBAN 0.9366 26 RURAL 0.7725

- 17.52% Anson County, North Carolina 16740 URBAN 0.9230 34 RURAL 0.7899

- 14.42% Greene County, North Carolina 24780 URBAN 0.9371 34 RURAL 0.7899

- 15.71% Erie County, Ohio 41780 URBAN 0.7784 36 RURAL 0.8348 7.25% Ottawa County, Ohio 45780 URBAN 0.9129 36 RURAL 0.8348

- 8.56% Preble County, Ohio 19380 URBAN 0.8938 36 RURAL 0.8348

- 6.60% Washington County, Ohio 37620 URBAN 0.8186 36 RURAL 0.8348 1.98% Stewart County, Tennessee 17300 URBAN 0.7526 44 RURAL 0.7277

- 3.31% Calhoun County, Texas 47020 URBAN 0.8473 45 RURAL 0.7847

- 7.39% Delta County, Texas 19124 URBAN 0.9703 45 RURAL 0.7847

- 19.13%CMS

- 1627

- P 90

San Jacinto County, Texas 26420 URBAN 0.9734 45 RURAL 0.7847

- 19.39% Summit County, Utah 41620 URBAN 0.9512 46 RURAL 0.9005

- 5.33% Cumberland County, Virginia 40060 URBAN 0.9625 49 RURAL 0.7554

- 21.52% Danville City County, Virginia 19260 URBAN 0.7963 49 RURAL 0.7554

- 5.14% King And Queen County, Virginia 40060 URBAN 0.9625 49 RURAL 0.7554

- 21.52% Louisa County, Virginia 40060 URBAN 0.9625 49 RURAL 0.7554

- 21.52% Pittsylvania County, Virginia 19260 URBAN 0.7963 49 RURAL 0.7554

- 5.14% Surry County, Virginia 47260 URBAN 0.9223 49 RURAL 0.7554

- 18.10% Morgan County, West Virginia 25180 URBAN 0.9080 51 RURAL 0.7274

- 19.89% Pleasants County, West Virginia 37620 URBAN 0.8186 51 RURAL 0.7274

- 11.14% We note that IPFs in some urban CBSAs would experience a change in their wage index values even though they remain urban because an urban CBSA’s boundaries and/or the counties included in that CBSA could change. Table 17 shows those counties that would experience a change in their wage index value in FY 2016 due to the new OMB CBSAs. Table 17 shows the urban CBSA delineations and wage index values for F Y 2015 based on existing CBSA delineations, compared with the urban CBSA delineations and wage index values for F Y 201 6 based on th e new OMB delineations, and the percentage change in these values , for counties that would remain urban even though the CBSA boundaries and/or counties included in that CBSA would change.
TABLE 17: FY 2015 URBAN to a DIFFERENT FY 2016 URBAN CBSA CROSSWALK

County N ame FY 2014 CBSA

Delineations/ FY 2015 data FY 2015 CBSA Delineations/ FY 2015 data Change in value (percent) CBSA Urban/

Rural Wage

Index CBSA Urban/

Rural Wage

Index Flagler County, Florida 37380 URBAN 0.8462 19660 URBAN 0.8376

- 1.02% De Kalb County, Illinois 16974 URBAN 1.0412 20994 URBAN 1.0299

- 1.09% Kane County, Illinois 16974 URBAN 1.0412 20994 URBAN 1.0299

- 1.09% Madison County, Indiana 11300 URBAN 1.0078 26900 URBAN 1.0133 0.55%CMS

- 1627

- P 91

Meade County, Kentucky 31140 URBAN 0.8593 21060 URBAN 0.7701

- 10.38% Essex County, Massachusetts 37764 URBAN 1.0769 15764 URBAN 1.1159 3.62% Ottawa County, Michigan 26100 URBAN 0.8136 24340 URBAN 0.8799 8.15% Jackson County, Mississippi 37700 URBAN 0.7396 25060 URBAN 0.7896 6.76% Bergen County, New Jersey 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Hudson County, New Jersey 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Middlesex County, New Jersey 20764 URBAN 1.0989 35614 URBAN 1.2837 16.82% Monmouth County, New Jersey 20764 URBAN 1.0989 35614 URBAN 1.2837 16.82% Ocean County, New Jersey 20764 URBAN 1.0989 35614 URBAN 1.2837 16.82% Passaic County, New Jersey 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Somerset County, New Jersey 20764 URBAN 1.0989 35084 URBAN 1.1233 2.22% Bronx County, New York 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Dutchess County, New York 39100 URBAN 1.1533 20524 URBAN 1.1345

- 1.63% Kings County, New York 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% New York County, New York 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Orange County, New York 39100 URBAN 1.1533 35614 URBAN 1.2837 11.31% Putnam County, New York 35644 URBAN 1.3110 20524 URBAN 1.1345

- 13.46% Queens County, New York 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Richmond County, New York 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Rockland County, New York 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Westchester County, New York 35644 URBAN 1.3110 35614 URBAN 1.2837

- 2.08% Brunswick County, North Carolina 48900 URBAN 0.8867 34820 URBAN 0.8620

- 2.79% Bucks County, Pennsylvania 37964 URBAN 1.0837 33874 URBAN 1.0157

- 6.27% Chester County, Pennsylvania 37964 URBAN 1.0837 33874 URBAN 1.0157

- 6.27% Montgomery County, Pennsylvania 37964 URBAN 1.0837 33874 URBAN 1.0157

- 6.27% Arecibo Municipio, Puerto Rico 41980 URBAN 0.4449 11640 URBAN 0.4213

- 5.30% Camuy Municipio, Puerto Rico 41980 URBAN 0.4449 11640 URBAN 0.4213

- 5.30% Ceiba Municipio, Puerto Rico 21940 URBAN 0.3669 41980 URBAN 0.4438 20.96% Fajardo Municipio, Puerto 21940 URBAN 0.3669 41980 URBAN 0.4438 20.96%CMS

- 1627

- P 92

Rico Guanica Municipio, Puerto Rico 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08% Guayanilla Municipio, Puerto Rico 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08% Hatillo Municipio, Puerto Rico 41980 URBAN 0.4449 11640 URBAN 0.4213

- 5.30% Luquillo Municipio, Puerto Rico 21940 URBAN 0.3669 41980 URBAN 0.4438 20.96% Penuelas Municipio, Puerto Rico 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08% Quebradillas Municipio, Puerto Rico 41980 URBAN 0.4449 11640 URBAN 0.4213

- 5.30% Yauco Municipio, Puerto Rico 49500 URBAN 0.3375 38660 URBAN 0.4154 23.08% Anderson County, South Carolina 11340 URBAN 0.8744 24860 URBAN 0.9161 4.77% Grainger County, Tennessee 34100 URBAN 0.6983 28940 URBAN 0.7015 0.46% Lincoln County, West Virginia 16620 URBAN 0.7988 26580 URBAN 0.8846 10.74% Putnam County, West Virginia 16620 URBAN 0.7988 26580 URBAN 0.8846 10.74% Likewise, IPFs currently located in a rural area may remain rural under the new CBSA delineations but experience a change in their rural wage index value due to implementation of the new CBSA delineations. Table 18 shows the FY 2015 CBSA delineations and rural statewid e wage index values, compared with the FY 2016 CBSA delineations and rural statewide wage index values, and the percentage change in these values , for those rural areas that would change

. TABLE 18 : FY 2016 CHANGES to the STATEWIDE RURAL WAGE INDEX CROS SWALK

County Name FY 2014 CBSA

Delineations/ FY 2015 data FY 2015 CBSA Delineations/ FY 2015 data Change in value (percent) CBSA Urban/

Rural Wage

Index CBS

A Urban/ Rural Wage

Index
ALABAMA 1 RURAL 0.6963 1 RURAL 0.6914

- 0.70% ARIZONA 3 RURAL 0.9125 3 RURAL 0.9219 1.03% CONNECTICUT 7 RURAL 1.1251 7 RURAL 1.1295 0.39% FLORIDA 10 RURAL 0.8006 10 RURAL 0.8371 4.56% GEORGIA 11 RURAL 0.7425 11 RURAL 0.7439 0.19% HAWAII 12 RURAL 1.0741 12 RURAL 1.0872 1.22%CMS

- 1627

- P 93

ILLINOIS 14 RURAL 0.8362 14 RURAL 0.8369 0.08% KANSAS 17 RURAL 0.7806 17 RURAL 0.7779

- 0.35% KENTUCKY 18 RURAL 0.7744 18 RURAL 0.7748 0.05% LOUISIANA 19 RURAL 0.7580 19 RURAL 0.7108

- 6.23% MARYLAND 21 RURAL 0.8554 21 RURAL 0.8746 2.24% MASSACHUSETTS 22 RURAL 1.3920 22 RURAL 1.1553

- 17.00% MICHIGAN 23 RURAL 0.8207 23 RURAL 0.8288 0.99% MISSISSIPPI 25 RURAL 0.7589 25 RURAL 0.7570

- 0.25% NEBRASKA 28 RURAL 0.8924 28 RURAL 0.8877

- 0.53% NEW YORK 33 RURAL 0.8208 33 RURAL 0.8192

- 0.19% NORTH CAROLINA 34 RURAL 0.7995 34 RURAL 0.7899

- 1.20% OHIO 36 RURAL 0.8329 36 RURAL 0.8348 0.23% OREGON 38 RURAL 1.0083 38 RURAL 0.9949

- 1.33% PENNSYLVANIA 39 RURAL 0.8719 39 RURAL 0.8083

- 7.29% SOUTH CAROLINA 42 RURAL 0.8374 42 RURAL 0.8370

- 0.05% TENNESSEE 44 RURAL 0.7365 44 RURAL 0.7277

- 1.19% TEXAS 45 RURAL 0.7855 45 RURAL 0.7847

- 0.10% UTAH 46 RURAL 0.8891 46 RURAL 0.9005 1.28% VIRGINIA 49 RURAL 0.7674 49 RURAL 0.7554

- 1.56% WASHINGTON 50 RURAL 1.0892 50 RURAL 1.0877

- 0.14% WEST VIRGINIA 51 RURAL 0.7410 51 RURAL 0.7274

- 1.84% WISCONSIN 52 RURAL 0.9041 52 RURAL 0.9087 0.51%
While we believe that the new CBSA delineations would result in wage index values that are more representative of the actual costs of labor in a given area, we also recognize that use of the new CBSA delineations would result in reduced payments to some IP Fs and increased payments to other IPFs, due to changes in wage index values. Approximately 23.4 percent of IPFs would experience a decrease in wage index values due to CBSA changes, while 12.4 percent of IPFs would experience an increase in wage index va lues due to CBSA changes. The remaining 64.1 percent of IPFs would experience no change in their wage index values (these percentages do not sum to 100.0 percent due to rounding)

. While the wage index CBSA changes would be implemented in a budget

- neutral fashion, the distributional effects of these CBSA changes appear to affect rural IPFs in particular; column 5 in Table 2 6 in section VII

. of thisCMS

- 1627

- P 94

proposed rule shows that rural pro viders overall are anticipated to experience payment reductions of 0.2 percent, with for

- profit rural psychiatric hospitals anticipated to experience the greatest reduction of 0.6 percent. We believe that it would be appropriate to provide for a transitio n period to mitigate any negative impacts on facilities that experience reduced payments as a result of our adopting the new OMB CBSA delineations. Therefore, w e propose to implement these
CBSA changes using a 1

- year transition with a blended wage index f or all providers. For FY 2016, t he wage index for each provider would consist of a blend of 50 percent of the FY 201 6
IPF wage index using the current OMB delineations and 50 percent of the FY 2016 IPF wage index using the new OMB delineations. This resu lts in an average of the 2 values. We propose that the FY 2017 IPF PPS wage index and subsequent IPF PPS wage indices would be based solely on the new OMB CBSA delineations. We believe a 1

- year transition strikes an appropriate balance between ensuring that IPF PPS payments are as accurate and stable as possible while giving IPFs time to adjust to the new CBSA delineations. The proposed FY 2016 IPF PPS Transitional wage index is located on the CMS website at http://www.cms.gov/Medicare/Medicare

- Fee

- for

- Service

- Payment/IPFPPS/WageIndex.html

. d . Adjustment for Rural Location and Proposal to Phase Out the Rural Adjustment for IPFs Losing Their Rural Adjustme nt Due to CBSA Changes In the November 2004 IPF PPS final rule, we provided a 17 percent payment adjustment for IPFs located in a rural area. This adjustment was based on the regression analysis, which indicated that the per diem cost of rural facilities was 17 percent higher than that of urban facilities after accounting for the influence of the other variables included in the regression. For
FY 201 6 , we propos e to continue to apply a 17 percent payment adjustment for IPFs located in a rural area as defined at §412.64(b)(1)(ii)(C). A complete discussion of the adjustment for ruralCMS

- 1627

- P 95

locations appears in the November 2004 IPF PPS final rule (69 FR 66954). As noted in section III.D.1. c . of this proposed rule, we are proposing to adopt OMB updates to CBSA delineations. Adoption of the updated CBSAs would change the status of 37 IPF providers currently designated as “ rural ” to “ urban ” for FY 2016 and subsequent fiscal
year s . As such, th ese 37 newly

- urban providers would no longer receive the 17 percent rural adjustment. While 34 of these 37 rural IPFs that would be designated as urban under the new CBSA delineations w ould experience an increa se in their wage index value , all 37 of thes e IP Fs would lose the 17 percent rural adjustment. Consistent with the tran sition policy adopted for Inpatient Rehabilitation Facilities (IRFs) in FY 2006 ( 70 FR 47923 through 47927 ) , we considered the appropriateness of applying a 3

- year phase

- out of the rural adjustment for I P Fs located in rural counties that would become urban under the new OMB delineations, given the potentially significant payment impacts for these IPFs . We belie ve that a phase

- out of the rural adjustment transition period for these 37 IPFs specifically is appropriate because we expect these I P Fs would experience a steeper and more abrupt reduction in their payments compared to other I P Fs

. Therefore, in addition to the 2

- year wage index transition policy noted above, we are proposing a budget

- neutral 3

- year phase

- out of the rural adjustment for existing FY 2015 rural
IP Fs that would become urban in FY 2016 and that experience a loss in payments due to changes from the new CBSA delineations. Accordingly, the incremental steps needed to reduce the impact of the loss of the FY 2015 rural adjustment of 17 percent would be taken over FYs 2016, 2017 and 2018

. This policy would allow rural I P Fs that would be classified as urban in FY 2016 to receive two

- thirds of the 2015 rural adjustment fo r FY 2016, as well as the blended wage index. For FY 2017, these I P Fs would receive the full FY 2017 wage index and one

- third of theCMS

- 1627

- P 96

FY 2015 rural adjustment. For FY 2018, these I P Fs would receive the full FY 2018 wage index without a rural adjustment. We believe a 3

- year budget

- neutral phase

- out of the rural adjustment for I P Fs that transition from rural to urban status under the new CBSA delineations would best accomplish the goals of mitigating the loss of the rural adjustment for existing FY 2015 rur al
I P Fs. The purpose of the gradual phase

- out of the rural adjustment for these providers is to alleviate the significant payment implications for existing rural I P Fs that may need time to adjust to the loss of their FY 2015 rural payment adjustment or th at experience a reduction in payments solely because of this re

- designation. As stated, this policy is specifically for rural I P Fs that become urban in FY 2016. W e are not implementing a transition policy for urban IPFs that become rural in FY 2016 becau se these I P Fs will receive the full rural adjustment of 17 percent beginning October 1, 2015. For the reasons discussed, we are proposing to implement a 3

- year budget

- neutral phase

out of the rural adjustment for the I P Fs that during FY 2015 were designate d as rural and for FY 2016 are designated as urban under the new CBSA system. This is in addition to our proposed implement ation of a 2

- year blended wage index for all I P Fs. We believe that the incremental reduction of the FY 2015 rural adjustment would be appropriate to mitigate a significant reduction in payment. We considered alternative timeframes for phasing out the rural adjustment for I P Fs which would transition from rural to urban status in FY 2016, but believe that a 3

- year budget

- neutral phase

- out of the rural adjustment would appropriately mitigate the adverse payment impacts for existing FY 2015 rural I P Fs that will be designated as urban I P Fs in FY
2016 , while also ensuring that payment rates for these providers are set accurately and
appropr iately. We in vite public comment on th is proposed polic y. e. Budget neutrality adjustmentCMS

- 1627

- P 97

Changes to the wage index are made in a budget

- neutral manner so that updates do not increase expenditures. Therefore, f or FY 201 6 , we propose to continue to apply a budget

neutrality adjustment in accordance with our existing budget

- neutrality policy. This policy requires us to estimate the total amount of IPF PPS payments for FY 2016 using the labor

- related share and the wage indice s from FY 2015 divided by the total estimated IPF PPS payments for
FY 2016 using the labor

- related share and wage indices from FY 2016. The estimated payments are based on FY 201 4 IPF claims, inflated to the appropriate FY. This quotient is the wage inde x budget

- neutrality factor, and it is applied in the update of the Federal per diem base rate for FY
201 6 in addition to the market basket described in section III.A

. of this proposed rule. The proposed wage index budget

- neutrality factor for FY 2016 is 1 .00 41

. 2 . Teaching Adjustment In the November 2004 IPF PPS final rule, we implemented regulations at §412.424(d)(1)(iii) to establish a facility

- level adjustment for IPFs that are, or are part of, teaching hospitals. The teaching adjustment accounts f or the higher indirect operating costs experienced by hospitals that participate in graduate medical education ( GME ) programs. The payment adjustments are made based on the ratio of the number of full

- time equivalent (FTE) interns and residents training i n the IPF and the IPF’s average daily census (ADC)

. Medicare makes direct GME payments (for direct costs such as resident and teaching physician salaries, and other direct teaching costs) to all teaching hospitals including those paid under a PPS, and thos e paid under the TEFRA rate

- of

- increase limits. These direct GME payments are made separately from payments for hospital operating costs and are not part of the
IPF PPS. The direct GME payments do not address the estimated higher indirect operating costs teaching hospitals may face.CMS

- 1627

- P 98

The results of the regression analysis of FY 2002 IPF data established the basis for the payment adjustments included in the November 2004 IPF PPS final rule. The results showed that the indirect teaching cost variable is significant in explaining the hig her costs of IPFs that have teaching programs. We calculated the teaching adjustment based on the IPF's "teaching variable," which is one plus the ratio of the number of FTE residents training in the IPF (subject to limitations described below) to the IPF 's ADC. We established the teaching adjustment in a manner that limited the incentives for IPFs to add FTE residents for the purpose of increasing their teaching adjustment. We imposed a cap on the number of FTE residents that may be counted for purpose s of calculating the teaching adjustment. The cap limits the number of FTE residents that teaching IPFs may count for the purpose of calculating the IPF PPS teaching adjustment, not the number of residents teaching institutions can hire or train. We calc ulated the number of FTE residents that trained in the IPF during a "base year" and used that FTE resident number as the cap. An IPF's FTE resident cap is ultimately determined based on the final settlement of the IPF's most recent cost report filed befor e November 15, 2004 (that is, the publication date of the IPF PPS final rule). A complete discussion on the temporary adjustment to the FTE cap to reflect residents added due to hospital closure and by residency program appears in the January 27, 2011 IPF PPS proposed rule (76 FR 5018 through 5020) and the May 6, 2011 IPF PPS final rule (76 R 26453 through 26456). In the regression analysis, the logarithm of the teaching variable had a coefficient value of 0.5150. We converted this cost effect to a teachi ng payment adjustment by treating the regression coefficient as an exponent and raising the teaching variable to a power equal to the coefficient value. We note that the coefficient value of 0.5150 was based on the regression analysis holding all other co mponents of the payment system constant. A complete discussion ofCMS

- 1627

- P 99

how the teaching adjustment was calculated appears in the November 2004 IPF PPS final rule (69 FR 66954 through 66957) and the May 2008 IPF PPS notice (73 FR 25721). As with other adjustm ent factors derived through the regression analysis, we do not plan to rerun the teaching adjustment factors in the regression analysis until we more fully analyze IPF PPS data. Therefore, in this proposed rule , for FY 201 6 , we propose to continue to reta in the coefficient value of 0.5150 for the teaching adjustment to the Federal per diem base rate.
3 . Cost of Living Adjustment for IPFs Located in Alaska and Hawaii. The IPF PPS includes a payment adjustment for IPFs located in Alaska and Hawaii based upon the county in which the IPF is located. As we explained in the November 2004 IPF PPS final rule, the FY 2002 data demonstrated that IPFs in Alaska and Hawaii had pe r diem costs that were disproportionately higher than other IPFs. Other Medicare PPSs (for example, the IPPS and LTCH PPS) adopted a cost of living adjustment (COLA) to account for the cost differential of care furnished in Alaska and Hawaii. We analyze d the effect of applying a COLA to payments for IPFs located in Alaska and Hawaii. The results of our analysis demonstrated that a COLA for IPFs located in Alaska and Hawaii would improve payment equity for these facilities. As a result of this analysis, we provided a COLA in the November 2004 IPF PPS final rule.
A COLA for IPFs located in Alaska and Hawaii is made by multiplying the nonlabor

related portion of the Federal per diem base rate by the applicable COLA factor based on the COLA area in which the IPF is located. The COLA factors are published on the Office of Personnel Management (OPM) website (http://www.opm.gov/oca/cola/rates.asp). We note that the COLA areas for Alaska are not defined by county as are the COLACMS

- 1627

- P 100

areas for Hawaii. In 5 CFR 591.207, the OPM established the following COLA areas:

 City of Anchorage, and 80

- kilometer (50

- mile) radius by road, as measured from the Federal courthouse;

 City of Fairbanks, and 80

- kilometer (50

- mile) radius by road, as measured from the Federal cour thouse;

 City of Juneau, and 80

- kilometer (50

- mile) radius by road, as measured from the Federal courthouse;

 Rest of the State of Alaska. As stated in the November 2004 IPF PPS final rule, we update the COLA factors according to u pdates established by the OPM

. However, s ections 1911 through 1919 of the Nonforeign Area Retirement Equity Assurance Act, as contained in subtitle B of title XIX of the National Defense Authorization Act (NDAA) for Fiscal Year 2010 (Pub. L. 111

- 84, October 28, 2009), transitions the Alaska and Hawaii COLAs to locality pay. Under section 1914 of Pub. L.
111

- 84, locality pay is being phased in over a 3

- year period beginning in January 2010, with COLA rates frozen as of the date of enactment, October 28, 2009, and then proportionate ly reduced to reflect the phase

- in of locality pay. When we published the proposed COLA factors in the January 2011 IPF PPS proposed rule (76 FR 4998) , we inadvertently selected the FY 2010 COLA rates w hich had been reduced to account for the phase

- in o f locality pay. We did not intend to propose the reduced COLA
rates because that would have understate d the adjustment. Since t he 2009 COLA rates d id not reflect the phase

- in of locality pay, we finalized the FY 2009 COLA rates for RY 2010 through
RY 201 4

. In the FY 2013 IPPS/LTCH final rule (77 FR 53700 through 53701), CMS established aCMS

- 1627

- P 101

methodology for FY 2014 to update the COLA factors for Alaska and Hawaii. Under that methodology, we use a comparison of the growth in the Consumer Price Indices (CPIs) in Anchorage, Alaska and Honolulu, Hawaii relative to the growth in the overall CPI as published by the Bureau of Labor Statistics (BLS) to update the COLA factors for all areas in Alaska and Hawaii, respectively. As discussed in the FY 2013 IPPS/L TCH proposed rule (77 FR 28145), because BLS publishes CPI data for only Anchorage, Alaska and Honolulu, Hawaii, our methodology for updating the COLA factors uses a comparison of the growth in the CPIs for those cities relative to the growth in the overal l CPI to update the COLA factors for all areas in Alaska and Hawaii, respectively. We believe that the relative price differences between these cities and the United States (as measured by the CPIs mentioned above) are generally appropriate proxies for th e relative price differences between the “other areas” of Alaska and Hawaii and the
United States. The CPIs for “All Items” that BLS publishes for Anchorage, Alaska, Honolulu, Hawaii, and for the average U.S. city are based on a different mix of commoditi es and services than is reflected in the nonlabor

- related share of the IPPS market basket. As such, under the methodology we established to update the COLA factors, we calculated a “reweighted CPI” using the CPI for commodities and the CPI for services fo r each of the geographic areas to mirror the composition of the IPPS market basket nonlabor

- related share. The current composition of BLS’ CPI for “All Items” for all of the respective areas is approximately 40 percent commodities and 60 percent services. However, the nonlabor

- related share of the IPPS market basket is comprised of 60 percent commodities and 40 percent services. Therefore, under the methodology established for FY 2014 in the FY 2013 IPPS/LTCH PPS final rule, we created reweighted indexes for Anchorage, Alaska, Honolulu, Hawaii, and the average U.S. city usingCMS

- 1627

- P 102

the respective CPI commodities index and CPI services index and applying the approximate 60/40 weights from the IPPS market basket. This approach is appropriate because we would

con tinue to make a COLA for hospitals located in Alaska and Hawaii by multiplying the nonlabor

- related portion of the standardized amount by a COLA factor. Under the COLA factor update methodology established in the FY 2014 IPPS/LTCH final rule, we adjust pa yments made to hospitals located in Alaska and Hawaii by incorporating a
25

- percent cap on the CPI

- updated COLA factors. We note that OPM’s COLA factors were calculated with a statutorily mandated cap of 25 percent, and since at least 1984, we have exerci sed our discretionary authority to adjust Alaska and Hawaii payments by incorporating this cap. In keeping with this historical policy, we would continue to use such a cap, as our proposal is based on OPM’s COLA factors. We believe this approach is appro priate because our CPI

updated COLA factors use the 2009 OPM COLA factors as a basis. In FY 2015 IPF PPS rulemaking, we adopt ed the same methodology for the COLA factors applied under the IPPS because IPFs are hospitals with a similar mix of commodities and services. W e think it is appropriate to have a consistent policy approach with that of other hospitals in Alaska and Hawaii. Therefore, in the FY 2015 IPF PPS final rule, we adopted the cost of living adjustment factors shown in the Addendum for IPF s located in Alaska and Hawaii. Under IPPS COLA policy, the COLA updates are determined every four years, when the IPPS market basket is rebased

. Since the IPPS COLA factors were last updated in FY 2014, they are not scheduled to be updated again until F Y 2018. As such, we propose to continue using the existing IPF PPS COLA factors in effect in FY 2015 for FY 2016. The IPF PPS COLA factors for FY 2016 are shown in the Addendum of this proposed rule.
4

. Proposed Adjustment for IPFs with a Qualifying Eme rgency Department (ED)CMS

- 1627

- P 103

T he IPF PPS includes a facility

- level adjustment for IPFs with qualifying EDs. We provide an adjustment to the Federal per diem base rate to account for the costs associated with maintaining a full

- service ED. The adjustment is int ended to account for ED costs incurred by a freestanding psychiatric hospital with a qualifying ED or a distinct part psychiatric unit of an
acute care hospital or a CAH , for preadmission services otherwise payable under the Medicare Outpatient Prospective Payment System (OPPS) , furnished to a beneficiary on the date of the beneficiary’s admission to the hospital and during the day immediately preceding the date of admiss ion to the IPF (see §413.40(c)(2)) , and the overhead cost of maintaining the ED. This payment is a facility

- level adjustment that applies to all IPF admissions (with one exception described below), regardless of whether a particular patient receives pread mission services in the hospital's ED. The ED adjustment is incorporated into the variable per diem adjustment for the first day of each stay for IPFs with a qualifying ED. That is, IPFs with a qualifying ED receive an adjustment factor of 1.31 as the var iable per diem adjustment for day 1 of each stay. If an IPF does not have a qualifying ED, it receives an adjustment factor of 1.19 as the variable per diem adjustment for day 1 of each patient stay. The ED adjustment is made on every qualifying claim except as described below. As specified in §412.424(d)(1)(v)(B), the ED adjustment is not made whe n a patient is discharged from an acute care hospital or CAH and admitted to the same hospital's or CAH's psychiatric unit. We clarified in the November 200 4 IPF PPS final rule (69 FR 66960) that a n ED adjustment is not made in this case because the costs associated with ED services are reflected in the DRG payment to the acute care hospital or through the reasonable cost payment made to the
CAH.CMS

- 1627

- P 104

Therefore , when patients are discharged from an acute care hospital or CAH and admitted to the same hospital or CAH's psychiatric unit, the IPF receives the 1.19 adjustment factor as the variable per diem adjustment for the first day of the patient's stay in the IP F. For FY 201 6 , we are proposing to continue to retain the 1.31 adjustment factor for IPFs with qualifying EDs. A complete discussion of the steps involved in the calculation of the ED adjustment factor appears in the November 2004 IPF PPS final rule ( 69 FR 66959 through 66960) and the May 2006 IPF PPS final rule (71 FR 27070 through 27072).
E

. Other Proposed Payment Adjustments and Policies 1. Outlier Payment Overview The IPF PPS includes an outlier adjustment to promote access to IPF care for those patients who require expensive care and to limit the financial risk of IPFs treating unusually costly patients. In the November 2004 IPF PPS final rule, we implemented regu lations at §412.424(d)(3)(i) to provide a per

- case payment for IPF stays that are extraordinarily costly. Providing additional payments to IPFs for extremely costly cases strongly improves the accuracy of the IPF PPS in determining resource costs at the p atient and facility level. These additional payments reduce the financial losses that would otherwise be incurred in treating patients who require more costly care and, therefore, reduce the incentives for IPFs to under

- serve these patients. We make out lier payments for discharges in which an IPF's estimated total cost for a case exceeds a fixed dollar loss threshold amount (multiplied by the IPF's facility

- level adjustments) plus the Federal per diem payment amount for the case. In instances when the ca se qualifies for an outlier payment, we pay 80 percent of the difference between the estimated cost for the case and the adjusted threshold amount for days 1CMS

- 1627

- P 105

through 9 of the stay (consistent with the median LOS for IPFs in FY 2002), and 60 percent of the difference for day 10 and thereafter. We established the 80 percent and 60 percent loss sharing ratios because we were concerned that a single ratio established at 80 percent (like other Medicare PPSs) might provide an incentive under the IPF per diem pay ment system to increase LOS in order to receive additional payments. After establishing the loss sharing ratios, we determined the current FY 2015 fixed dollar loss threshold amount through payment simulations designed to compute a dollar loss beyond whi ch payments are estimated to meet the 2 percent outlier spending target. Each year when we update the IPF PPS, we simulate payments using the latest available data to compute the fixed dollar loss threshold so that outlier payments represent 2 percent of total projected IPF PPS payments. 2

. Proposed Update to the Outlier Fixed Dollar Loss Threshold Amount In accordance with the update methodology described in §412.428(d), we propose to update the fixed dollar loss threshold amount used under the IPF P PS outlier policy. Based on the regression analysis and payment simulations used to develop the IPF PPS, we established a 2 percent outlier policy which strikes an appropriate balance between protecting IPFs from extraordinarily costly cases while ensurin g the adequacy of the Federal per diem base rate for all other cases that are not outlier cases. Based on an analysis of the latest available data (that is, FY 2014 IPF claims) and rate increases , we believe it is necessary to update the fixed dollar los s threshold amount in order to maintain an outlier percentage that equals 2 percent of total estimated IPF PPS payments. To update the IPF outlier threshold amount for FY 2016, we propose to use FY 2014 claims data and the same methodology that we used to set the initial outlier threshold amount in the MayCMS

- 1627

- P 106

2006 IPF PPS final rule (71 FR 27072 and 27073) , which is also the same methodology that we used to update the outlier threshold amounts for years 2008 through 2015. Based on an analysis of this updated data, we estimate that IPF outlier payments as a percentage of total estimated payments are approxi mately 2.3 percent in FY 2015. Therefore, we propose to update the outlier threshold amount to $9,825 to maintain estimated outlier payments at approximately 2 percent of total estimated aggregate IPF payments for FY 2016.
3

. Proposed Update to IPF Cost

- to

- Charge Ratio Ceilings
U nder the IPF PPS, an outlier payment is made if an IPF's cost for a stay exceeds a fixed dollar loss threshold amount plus the IPF PPS amount . In order to establish an IPF's cost for a particular case, we multiply the IPF's reported charges on the discharge bill by its overall cost

- to

charge ratio (CCR). This approach to determining an IPF's cost is consistent with the approach used under the IPPS and other PPSs. In the June 2003 IPPS final rule (68 FR 34494) , we implemente d changes to the IPPS policy used to determine CCRs for acute care hospitals because we became aware that payment vulnerabilities resulted in inappropriate outlier payments. Under the IPPS, we established a statistical measure of accuracy for CCRs in orde r to ensure that aberrant CCR data did not result in inappropriate outlier payments. As we indicated in the November 2004 IPF PPS final rule (69 FR 66961) , because we believe that the IPF outlier policy is susceptible to the same payment vulnerabilities as the IPPS, we adopted a method to ensure the statistical accuracy of CCRs under the IPF PPS. Specifically , we adopted the following procedure in the November 2004 IPF PPS final rule: We calculated 2 national ceilings, one for IPFs located in rural are as and one for IPFs located in urban areas. We computed the ceilings by first calculating the national average and the standard deviation of the CCR for both urban and rural IPFs using the most recent CCRs entered in the CY 201 5 ProviderCMS

- 1627

- P 107

Specific File. To determine the rural and urban ceilings, we multiplied each of the standard deviations by 3 and added the result to the appropriate national CCR average (either rural or urban). The upper threshold CCR for IPFs in FY 201 6 is 1. 9041 for rural IPFs, and 1. 6881 for urban IPFs, based on CBSA

- based geographic designations. If an IPF's CCR is above the applicable ceiling, the ratio is considered statistically inaccurate , and we assign the appropriate national (either rural or urban) median CCR to the IPF. We apply the national CCRs to the following situations:

 New IPFs that have not yet submitted their first Medicare cost report

. W e continue to use these national CCRs until the facility’s actual CCR can be computed using the first tentatively or final settled cost report

.

 IPFs whose overall CCR is in excess of 3 standard deviations above the corresponding national geometric mean (that is, above the ceili ng).

 Other IPFs for which the MAC obtains inaccurate or incomplete data with which to calculate a CCR.
We are not proposing to mak e any changes to the application of the national CCRs or to the procedures for updating the CCR ceilings in FY 201 6 . Howe ver, we are proposing to updat e the FY 201 6 national median and ceiling CCRs for urban and rural IPFs based on the CCRs entered in the latest available IPF PPS Provider Specific File. Specifically, for FY 201 6 , and to be used in each of the 3 situations listed above, using the most recent CCRs entered in the CY
201 5 Provider Specific File we estimate the national median CCR of 0. 6210 for rural IPFs and the national median CCR of 0. 4675 for urban IPFs. These calculations are based on the IPF's location (either urban or rural) using the CBSA

- based geographic designations

.CMS

- 1627

- P 108

A complete discussion regarding the national median CCRs appears in the November 2004 IPF PPS final rule (69 FR 66961 through 66964). IV. Other Payment Policy Is sues A. ICD

- 10

- CM and ICD

- 10

- PCS Implementation We remind IPF providers that CMS is implementing the International Classification of Diseases, 10 th Revision, Clinical Modification (ICD

– 10

– CM) as the HIPAA designated code set for reporting diseases, injuries, impairments, other health related problems, their manifestations, and causes of injury as of October 1, 2015

. Below is a brief history of key activities leading to the October 1, 2015 implementation date. In the Standards for Electronic Transact ion s final rule, published in the Federal Register on August 17, 2000 (65 FR 50312), the Department adopted the International Classification of Diseases, 9th Revision, Clinical Modification (ICD

– 9

– CM) as the HIPAA designated code set for reporting diseases , injuries, impairments, other health related problems, their manifestations, and causes of injury. Therefore, on January 1, 2005 when the IPF PPS began, we used ICD

– 9

– CM as the designated code set for the IPF PPS. IPF claims with a principal diagnosis i ncluded in Chapter Five of the ICD

– 9

– CM are paid the Federal per diem base rate and all other applicable adjustments, including any applicable DRG adjustment. Together with the rest of the healthcare industry, CMS was scheduled to implement the
10 th revi sion of the ICD coding scheme, that is, ICD

– 10

– CM, on October 1, 2014. Hence, in the
F Y 2014 IPF PPS final rule (78 FR 46741

- 46742 ), we finalized a policy that ICD

– 10

– CM codes will be used in IPF PPS. On April 1, 2014, the Protecting Access to Medicare A ct of 2014 (PAMA) (Pub. L. No.
113

- 93) was enacted. Section 212 of PAMA, titled “Delay in Transition from ICD

- 9 to ICD

- 10CMS

- 1627

- P 109

Code Sets,” provide d that “[t]he Secretary of Health and Human Services may not, prior to October 1, 2015, adopt ICD

- 10 code sets as the standard for code sets under section 1173(c) of the Social Security Act (42 U.S.C. 1320d

- 2(c)) and section 162.1002 of title 45, Code of Federal Regulations.” On May 1, 2014, the Secretary announced that HHS expected to issue an interim final rule tha t would require use of ICD

– 10

– CM beginning October 1, 2015 and would continue to require use of ICD

– 9

– CM through September 30, 2015. This announcement is available on the CMS web site at http ://cms.gov/Medicare/Coding/ICD10/index.html

. HHS finalized the new compliance date of October 1, 2015 for ICD

– 10

– CM and ICD

– 10

– PCS in an August 4, 2014 final rule titled ‘‘Administrative Simplification: Change to the Compliance Date for the
International Classification of Diseases, 10th Revision (ICD

– 10

– CM and ICD

– 10

– PCS)’’ (79 FR 45128). Th is rule also requires HIPAA covered entities to continue to use the ICD

– 9

- CM code set through September 30, 2015. Therefore, beginning October 1, 2015 , we require use of the ICD

- 10

- CM and ICD

- 10

- PCS codes for reporting the MS

- DRG and comorbidity adjustment factors for IPF services. Every year, changes to the ICD

- 10

- CM and the ICD

- 10

- PCS coding system will be addressed in the IPPS proposed and final rules. The change s to the codes are effective October 1 of each year and must be used by acute care hospitals as well as other providers to report diagnostic and procedure information. The IPF PPS has always incorporated ICD

– 9

– CM coding changes made in the annual IPPS upd ate and will continue to do so for the ICD

- 10

- CM and ICD

10

- PCS coding changes. We will continue to publish coding changes in a Transmittal/Change Request, similar to how coding changes are announced by the IPPS and LTCH PPS. The coding changes relevant to the IPF PPS are also published in the IPF PPS proposed and final rules, or in IPF PPS update notices. In § 412.428(e), we indicate that CMS will publish informationCMS

- 1627

- P 110

pertaining to the annual update for the IPF PPS, which includes describing the ICD

- 9

- CM coding changes and DRG classification changes discussed in the annual update to the hospital IPPS regulations. Because ICD

- 10

- CM will be implemented on October 1, 2015, we need to update the regulation language at § 412.428(e) to refer to ICD

- 10

- CM , rather than ICD

- 9

- CM

. Therefore , we propose to revise §412.428(e) to state that the information we will publish annually in the Federal Register to describe IPF PPS updates would describe the ICD

- 10

- CM coding changes and DRG classification changes discussed in the annual update to the hospital inpatient prospective payment system regulations. In the FY 2015 IPF PPS final rule (79 FR 45945 through 46946), the MS

- DRGs were converted so that the MS

- DRG assignment logic
uses ICD

- 10

- CM/PCS codes directly. When a n I PF submits a claim for discharges, the ICD

- 10

- CM/PCS diagnosis and procedure codes will be assigned to the correct MS

- DRG. In the FY 2015 IPF PPS final rule, we also identified the ICD

- 10

- CM/PCS codes that are eligible for comorbidity payment adjustments under the IPF PPS (79 FR 45947 through 45955). The ICD

- 10

- CM guidelines are updated each year along with the ICD

- 10

- CM code
set. To find the annual coding guidelines, go to CDC’s website at http://www.cdc.gov/nchs/icd/icd10cm.htm or the annual ICD

- 10

- CM updates posted on the CMS
ICD

- 10 website at http://www.cms.gov/Medicare/Coding/ICD10/index.html

. B

. Status of Future Refi nements For RY 2012, we identified several areas of concern for future refinement , and we invited comments on these issues in our RY 2012 proposed and final rules. For further discussion of these issues and to review the public comments, we refer readers to the RY 2012 IPF PPS proposed rule (76 FR 4998) and final rule (76 FR 26432). We have delayed making refinements to the IPF PPS until we have completed a thoroughCMS

- 1627

- P 111

analysis of IPF PPS data on which to base those refinements. Specifically, we will delay updating the adjustment factors derived from the regression analysis until we have IPF PPS data that include as much information as possible regarding the patient

- level characteristics of the population that each IPF serves. We have begun the necessary an alysis to better understand IPF industry practices so that we may refine the IPF PPS in the future, as appropriate. IPF Covered Services The IPF PPS established the Federal per diem base rate for each patient day in an IPF from the national average routine operating, ancillary, and capital costs. Preliminary analysis reveal s that in 2012 to 2013, over 20 percent of IPF stays show no report ed ancillary costs , such as laboratory and drug costs, in cost reports or charges on claims

. The majority of these stays with zero ancillary costs or charges were in for

- profit , free

- standing IPF hospitals

. We would expect that patients admitted to an IP F would undergo laboratory testing as part of the admission history and physical. We would also expect that most patients requiring hospitalization for active psychiatric treatment would need drugs

. Therefore, we were surprised when the analysis showed s uch a large number of stays reporting no laboratory services and no drugs were provided throughout the hospitalization. Until further analysis is completed, we can only surmise that the stays did not require ancillaries and therefore, were not provided, o r that the ancillary services were separately billed.
We remind the industry that CMS pays only the inpatient psychiatric facilit y for services furnished to a Medicare beneficiary who is an inpatient of th at inpatient psychiatric facility , except for certain professional services, and that payments made under this subpart are payments in full for all inpatient hospital se rvices , provided directly or under arrangement (see 42 CFR 412.404(d) ) , as specified in 42 CFR 409.10.CMS

- 1627

- P 112

The covered ser vices specified in § 409.10 (a) , which apply to IPFs, include the following : b ed and board ; n ursing services and other related services ; u se of hospital or CAH facilities ;

m edical social services ; d rugs, biologicals, supplies, appliances, and equipment ; c ert ain other diagnostic or therapeutic services ; m edical or surgical services provided by certain interns or residents

- in

- training ; and t ransportation services, including transport by ambulance. Only the professional services listed in § 409.10(b) can be separately billed for a Medicare beneficiary who is an inpatient at an IPF , includ ing services of p hysician s, p hysician assistant s,

n urse practitioner s, c linical nurse specialist s, c ertified nurse mid

- wi v e s, anesthetists, and qualified psychologists. ( see § 409.10 (b) for specifics on how these professions and services are defined. These regulations are available online at the electronic Code of Federal Regulations, at http://www.e cfr.gov/cgi

- bin/text

- idx?c=ecfr&tpl=%2Findex.tpl

. )
A ncillary costs such as laboratory costs and drugs are already included in the Medicare IPF PPS per diem payment a nd should not be unbundled and billed separately to Medicare . We expect that the IPF would be recording the cost of all drugs provided to its Medicare patients on its Medicare cost reports, and reporting charges for those drugs on its Medicare claims. We expect that when an IPF contracts with an outside laboratory to provide services to its M edicare inpatients, the IPF would instruct the laboratory to bill the IPF and not to bill Medicare.
S imilarly, d rugs provided to IPF Medicare inpatients where Medicare is the primary payer should not be billed to Part D or to other insurers. We are conti nuing to analyze claims and cost report data that do not include ancillary charges or costs, and will be sharing our findings with the Center for Program Integrity and the Office of Financial Management for further investigation, as the results warrant. O ur refinement analysis is dependent on recent precise data for costs, including ancillary costs. We willCMS

- 1627

- P 113

continue to collect these data until an accurate refinement analysis can be performed. Therefore,

we are not proposing refinements in this proposed r ule

. Once we have gathered timely and accurate data, we will analyze that data with the expectation of a refinement update in future rulemaking. We invite comments on this issue of zero ancillary costs to better understand industry practices.
V. Inpatient Psychiatric Facilities Quality Reporting (IPFQR) Program A. Background 1. Statutory Authority Section 1886(s)(4) of the Act, as added and amended by sections 3401(f) and 10322(a) of the Affordable Care Act, requires the Secretary to implement a quality reporting program for inpatient psychiatric hospitals and psychiatric units. Section 1886(s)(4)(A)(i) of the Act requires that, for FY 2014 2 and each subsequent fiscal year, the Secretary must reduce any annual update to a standard Federal rate for discharges occurring during the rate year by 2.0 percentage points for any inpatient psychiatric hospital or psychiatric unit that does not comply with quality data submission requirements with respect to an applicable fiscal year. As provided in secti on 1886(s)(4)(A)(ii) of the Act, the application of the reduction for failure to report under section 1886(s)(4)(A)(i) of the Act may result in an annual update of less

2 The statute uses the term “rate year” (RY). However, beginning with the an nual update of the inpatient psychiatric facility prospective payment system (IPF PPS) that took effect on July 1, 2011 (RY 2012), we aligned the IPF PPS update with the annual update of the ICD

- 9

- CM codes, effective on October 1 of each year. This change allowed for annual payment updates and the ICD

- 9

- CM coding update to occur on the same schedule and appear in the same Federal Register document, promoting administrative efficiency. To reflect the change to the annual payment rate update cycle, we revis ed the regulations at 42 CFR 412.402 to specify that, beginning October 1, 2012, the RY update period would be the 12

- month period from October 1 through September 30, which we refer to as a “fiscal year” (FY) (76 FR 26435). Therefore, with respect to the IPFQR Program, the terms “rate year”, as used in the statute, and “fiscal year” as used in the regulation, both refer to the period from October 1 through September 30. For more information regarding this terminology change, we refer readers to section I II. of the RY 2012 IPF PPS final rule (76 FR 26434 through 26435).CMS

- 1627

- P 114

than 0.0 percent for a fiscal year, and may result in payment rates under section 1886( s)(1) of the Act being less than the payment rates for the preceding year. In addition, section 1886(s)(4)(B) of the Act requires that the application of the reduction to a standard Federal rate update be noncumulative across fiscal years. Thus, any redu ction applied under section 1886(s)(4)(A) of the Act will apply only with respect to the fiscal year rate involved and the Secretary may not take into account the reduction in computing the payment amount under the system described in section 1886(s)(1) of the Act for subsequent years. Section 1886(s)(4)(C) of the Act requires that, for FY 2014 (October 1, 2013, through September 30, 2014) and each subsequent year, each psychiatric hospital and psychiatric unit must submit to the Secretary data on quality measures as specified by the Secretary. The data must be submitted in a form and manner and at a time specified by the Secretary. Under section 1886(s)(4)(D)(i) of the Act, measures selected for the quality reporting program must have been endorsed by th e entity with a contract under section 1890(a) of the Act. The National Quality Forum (NQF) currently holds this contract. Section 1886(s)(4)(D)(ii) of the Act provides that, in the case of a specified area or medical topic determined appropriate by the S ecretary 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 so endorsed as long as due consideration is given to measures that hav e been endorsed or adopted by a consensus organization identified by the Secretary. Pursuant to section 1886(s)(4)(D)(iii) of the Act, the Secretary must publish the measures applicable to the FY 2014 IPFQR Program no later than October 1, 2012. Section 1886(s)(4)(E) of the Act requires the Secretary to establish procedures for making public the data submitted by inpatient psychiatric hospitals and psychiatric units underCMS

- 1627

- P 115

the IPFQR Program. These procedures must ensure that a facility has the opportunity to review its data prior to the data being made public. The Secretary must report quality measures that relate to services furnished by the psychiatric hospitals and units on the CMS website. 2. Covered Entities In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645), we established that the IPFQR Program’s quality reporting requirements cover those psychiatric hospitals and psychiatric units paid under Medicare’s IPF PPS (42 CFR 412.404(b)). Generally, psychiatric hospitals and psychiatric units within acute care and critical access hospitals that treat Medicare patients are paid under the IPF PPS. Consistent with prior rules, we continue to use the term “inpatient psychiatric facility” (IPF) to refer to both inpatient psychiatric hospitals and psychia tric units. This usage follows the terminology in our IPF PPS regulations at § 412.402. For more information on covered entities, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53645). 3. Considerations in Selecting Quality Measures Our objective in selecting quality measures is to balance the need for information on the full spectrum of care delivery and the need to minimize the burden of data collection and reporting. We have focused on measures that evaluate critical processes of care that have significant impact on patient outcomes and support CMS and HHS priorities for improved quality and efficiency of care provided by IPFs. We refer readers to the FY 2013 IPPS/LTCH PPS final rule Section 4.a. (77 FR 53645 through 53646) for a detailed discussion of the considerations taken into account in selecting quality measures. Before being proposed for inclusion in the IPFQR Program, measures are placed on a list of measures under consideration, which is published annually by December 1 on behalf of CMSCMS

- 1627

- P 116

by the NQF. In compliance with section 1890A(a)(2) of the Act, measures proposed for the IPFQR Program were included in 2 publicly available documents: “List of Measures under Consideration for December 1, 2013,” and “List of Measures under Consideration for December 1, 2014” ( http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.
aspx ). The Measure Applications Partnership (MAP), a multi

- stakeholder group convened by the NQF, reviews the measures under consideration for the IPFQR Program, among other Federal programs, and provides input on those measures to the Secretary. The MAP’s 2014 and 2015 recommendations for quality measures under consideration are captured in the following documents: “MAP Pre

- Rulemaking Report: 2014 Recommendations on Measures for More than 20 Federal Programs” ( http://www.qualityforum.org/Publications/2014/01/MAP_Pre

Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Prog

rams .aspx ) and “ Process and Approach for MAP Pre

- Rulemaking Deliberations 2015 ” ( http://www.qualityforum.org/Publications/2015/ 01/Process_and_Approach_for_MAP_Pre

Rulemaking_Deliberations_2015.aspx ). We considered the input and recommendations provided by the MAP in selecting all measures for the Program, including those discussed below. B. Retention of IPFQR Program Measures A dopted in Previous Payment Determinations Since the inception of the IPFQR Program in FY 2013, we have adopted a total of 14 mandatory measures. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53646 through 53652), we adopted six chart

- abstracted IPF quali ty measures for the FY 2014 payment determination and subsequent years. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50889 through 50895), we added 2 measures for the FY 2016 payment determination and subsequent years

. In the FY 2015 IPF PPS final rule (79 FR 45963 through 45974), we finalized the addition of 2 newCMS

- 1627

- P 117

measures to the IPFQR Program to those already adopted for the FY 2016 payment determination and subsequent years, and finalized four quality measures for the FY 2017 payment determination and subsequent years. C. Proposed Removal of HBIPS

- 4 from the IPFQR Program Measure Set for the FY 2017 Payment Determination and Subsequent Years We first adopted HBIPS

- 4 Patients Discharged on Multiple Antipsychotic Medications in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53649 through 53650). We refer readers to that rule for a detailed discussion of the measure. At the time that we adopted the measure, it was NQF

- endorsed and intended for use in conjunction with HBIPS

- 5 Patients Discharged on Multi ple Antipsychotic Medications with Appropriate Justification. However, NQF removed its endorsement of HBIPS

- 4 in January 2014. The NQF’s Behavioral Health Steering Committee, in its May 2014 Technical Expert Panel Report, found that current evidence indi cated that
HBIPS

- 4 “does not allow for the distinction of differences in providers . . . .” 3 Moreover, the Steering Committee noted that HBIPS

- 4 “is not a measure of quality of patient care . . . and there is insufficient evidence to warrant the endorseme nt of this measure given the use of HBIPS

- 5, which addresses patients discharged on multiple antipsychotic medications with appropriate justification.” 4 For these reasons, the Steering Committee did not re

- endorse HBIPS

- 4. As we stated in the FY 2013 IP PS/LTCH PPS final rule, we originally proposed HBIPS

4, in part, because HBIPS

- 4 and HBIPS

- 5 were intended to be reported as a set (77 FR 53649). However, as discussed above, NQF no longer believes HBIPS

- 4 is necessary in that set, and we

3 Behavioral Health Endorsement Maintenance 2014, Phase 2, Technical Report, 67, (May 9, 2014). A vailable at http://www.qualityforum.org/Publications/2014/05/Behavioral_Health_Endorsement_Maintenance_2014_

- _Phase_II.aspx

. 4 Ibid

.CMS

- 1627

- P 118

agree. We have the authority to maintain measures that are not NQF

- endorsed under section 1886(s)(4)(D)(ii) of the Act. However, based on the loss of NQF endorsement and because providers must still submit data for HBIPS

- 5, which we believe sufficiently includes the
inf ormation HBIPS

- 4 was intended to collect, we believe removal of HBIPS

- 4 from the IPFQR Program is warranted. We note that the data collection period for FY 2016 has ended and providers are required to submit this data before this rule will be finalized. Therefore, FY 2017 is the first year that we would be able to remove this measure from the program. In summary, Table 19, below, identifies the measure that we are proposing to remove beginning with the FY 2017 payment determination. We request comment o n this proposal.
Table 19
- IPFQR Program Measure Proposed to be Removed for the FY 2017 Payment Determination and Subsequent Years NQF # Measure ID Measure
N/A HBIPS

- 4 Patients Discharged on Multiple Antipsychotic Medications D. New Quality Measures Proposed for the FY 2018 Payment Determination and Subsequent
Years For the FY 2018 payment determination and subsequent years, we are proposing five new measures. The sections below outline our rationale for proposing these measures.
1. TOB

- 3 Tobacco U se Treatment Provided or Offered at Discharge and the subset measure
TOB

- 3a Tobacco Use Treatment at Discharge (NQF #1656) Tobacco use is one of the greatest contributors of morbidity and mortality in the United States, accounting for more than 435,000 dea ths annually. 5 Smoking is a known cause of

5 Centers for Disease Control and Prevention. Annual Smoking

- Attributable Mortality , Years of Potential Life Lost, and Productivity Losses

— United States, 2000

- 2004." Morb Mortal Wkly Rep. 2008. 57(45): 1226

- 1228. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5745a3.htm

.CMS

- 1627

- P 119

multiple cancers, heart disease, stroke, complications of pregnancy, chronic obstructive pulmonary disease, other respiratory problems, poorer wound healing, and many other diseases. 6 This health issue has signi ficant implications for persons with mental illness and substance use disorders. Tobacco use is much higher among people with co

- existing mental health conditions than for the general population. 7 One study has estimated that these individuals are twice as likely to smoke as the rest of the population. 8 Tobacco use also creates a heavy financial cost to both individuals and society. Smoking

- attributable health care expenditures are estimated at $96 billion per year in direct medical expenses and $97 bil lion in lost productivity. 9 Strong and consistent evidence demonstrates that timely tobacco dependence interventions for patients using tobacco can significantly reduce the risk of developing a tobacco

related disease, as well as provide improved health outcomes for those already suffering from a tobacco

- related disease. 10 Even a minimal intervention has been shown to result in cessation. 11 Research discloses that tobacco users hospitalized with psychiatric illnesses who enter into

6 U.S. Department of Health and Human Services. “The health consequences of smoking: a report of the Surgeon General.” Atlanta, GA, U.S. Department of Health and Human Services, Centers for Disease Con trol and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2004. 7 Fiore, Michael C., Goplerud, Eric, Shroeder, Steven A. (2010). The Joint Commission’s New Tobacco Cessation Measures

– Will Hosp itals Do the Right Thing? N Engl J Med 2012; 366:1172

- 1174. A vailable at http://www.nejm.org/doi/full/10.1056/nejmp1115176

. 8 Lasser K, Boyd JW, Woolhandler S, Himmelstein, DU, McCormick D, Bor DH. Smoking and mental illness: A population

- based prevalence study. JAMA . 2000;284(20):2606

- 2610. 9 Centers for Disease Control and Prevention. “Best Practices for Comprehensive Tobacco Control Programs

— 2007.” Atlanta, GA, Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2007. 10 U.S. Department of Health and Human Services. “The health consequences of smoking: a rep ort of the Surgeon General.” Atlanta, GA, U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2004. 11 Fiore MC, Jaén CR, Baker TB, et al. Treating Tobacco Use and Dependence: 2008 Update. Clinical Practice Guideline. Rockville, MD: U.S. Department of Health and Human Services. Public Health Service. May 2008, available at http://www.ncbi.nlm.nih.gov/books/NBK63952

.CMS

- 1627

- P 120

smoking

- cessation treatment can successfully overcome their tobacco dependence; 12 however, “studies show that many hospitals do not consistently provide cessation services to their patients.” 13 Evidence also suggests that tobacco cessation treat ment does not increase, and may even decrease, the risk of re

- hospitalization for tobacco users hospitalized with psychiatric illnesses. 14 Research further demonstrates that effective tobacco cessation support across the care continuum can be provided with only minimal additional provider effort and without harm to the mental health recovery process. 15
TOB

- 3 (NQF #1656) is a chart

- abstracted measure that identifies those patients 18 years of age and older who have used tobacco products within 30 days of a dmission and who “were
referred to or refused evidence

- based outpatient counseling AND received or refused a prescription for FDA

- approved cessation medication upon discharge.” 16 TOB

- 3a is a subset of
TOB

- 3 and identifies those IPF “patients who were refer red to evidence

- based outpatient counseling AND received a prescription for FDA

- approved cessation medication upon discharge as well as those who were referred to outpatient counseling and had reason for not receiving a prescription for medication.” 17 Prov iders must report this measure set as “an overall rate which includes all patients to whom tobacco treatment was provided, or offered and refused, at the time of hospital discharge (TOB

- 3), and a second rate, a subset of the first, which includes only thos e

12 Prochaska, JJ, et al. “Efficacy of Initiating Tobacco Dependence Treatment in Inpatient Psychiatry: A Randomized Controlled Trial.” Am. J. Pub. Health . 2013 August 15; e1

- e9. 13 Fiore, Michael C., Go plerud, Eric, Shroeder, Steven A. (2010). The Joint Commission’s New Tobacco Cessation Measures

– Will Hospitals Do the Right Thing? N Engl J Med 2012; 366:1172

- 1174, available at http://ww w.nejm.org/doi/full/10.1056/nejmp1115176

. 14 Prochaska, JJ, et al. “Efficacy of Initiating Tobacco Dependence Treatment in Inpatient Psychiatry: A Randomized Controlled Trial.” Am. J. Pub. Health . 2013 August 15; e1

- e9. 15 Ibid. 16 TOB

- 3 and TOB

- 3a Measure Specifications, available at http://www.jointcommission.org/assets/1/6/HIQR_Jan2015_v4_4a_1_EXE.zip 17 Ibid

.CMS

- 1627

- P 121

patients who received tobacco use treatment at discharge. (TOB

- 3a).” 18 For more information on the measure specifications, we refer readers to the Specifications Manual for National Hospital Inpatient Quality Measures at https://www.qualitynet.org/dcs/Co ntentServer?c=Page&pagename=QnetPublic%2FPage%2FQn etTier4&cid=1228773989482. Providing counseling and recommending cessation medication are core strategies of the Treating Tobacco Use and Dependence Guidelines. 19 For the reasons stated above, we believe t hat adoption of the TOB

- 3/TOB

- 3a measure set, which assesses IPFs’ offering of these tobacco use cessation treatments to IPF patients, would result in better overall health outcomes for IPF patients. Furthermore, the adoption of this measure set would strengthen related measures already in place in the IPFQR Program. Currently, the IPFQR Program includes 2 other tobacco cessation measures: (1) Tobacco Use Screening (TOB

- 1), a chart

- abstracted measure that assesses hospitalized patients who are screened within the first 3 days of admission for tobacco use (cigarettes, smokeless tobacco, pipe, and cigar) within the previous 30 days; and (2) The Tobacco Use Treatment Provided or Offered (TOB

- 2), which inc ludes the subset, Tobacco Use Treatment (TOB

- 2a). TOB

- 2/TOB

- 2a is a chart

- abstracted measure set reported as an overall rate that includes all patients to whom tobacco use treatment was provided, or offered and refused, and a second rate, a subset of the first, which includes only those patients who received tobacco use treatment. TOB

- 1 and TOB

- 2/TOB

- 2a provide a picture of care given during the

18 TOB

- 3 and TOB

- 3a Measure Specifications, available at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetP ublic%2FPage%2FQnetTier4&cid=12287 73989482

. 19 See Fiore MC, Jaén CR, Baker TB, et al. Treating Tobacco Use and Dependence: 2008 Update. Clinical Practice Guideline. Rockville, MD: U.S. Department of Health and Human Services. Public Health Service. May 20 08. A vailable at http://www.ncbi.nlm.nih.gov/books/NBK63952

. The specific strategy is further specified in Strategy 4A.CMS

- 1627

- P 122

hospital stay. In contrast, TOB

- 3/TOB

- 3a present the care given at discharge. Together, these 3
measures/meas ure sets present a broader picture of the entire episode of care. If the TOB

3/TOB

- 3a measure set is adopted, the IPFQR Program’s measure set would showcase both the facility’s practice of screening patients for tobacco use and the outcomes of a facility’ s practice of offering opportunities to stop during the course of the stay and upon discharge. Further, the adoption of TOB

- 3/TOB

- 3a could alert IPFs to gaps in treatment for smoking cessation intervention at discharge if rates for these measures are low. This knowledge would support the development of quality improvement plans and better engage patients in treatment. We believe that public reporting of this information would provide consumers and other stakeholders with useful information in choosing a mong different facilities for patients who use tobacco products. In addition, this measure set promotes the National Quality Strategy priority of Effective Prevention and Treatment, particularly with respect to the leading causes of mortality, starting wi th cardiovascular disease. As noted above, tobacco use is one of the greatest contributors of morbidity and mortality in the United States, 20 contributing to various forms of cardiovascular disease, among many other conditions. 21 “Tobacco use remains the

c hief preventable cause of illness and death in our society.” 22 Cessation interventions can

20 Centers for Disease Control and Prevention. Annual Smoking

- Attributable Mortality, Years of Potential Life Lost, and Productivity Losses

— United States, 2000

- 2004." Morb Mortal Wkly Rep . 2008. 57(45): 1226

- 1228. Available at: http://www.cdc.gov/mmwr/preview/ mmwrhtml/mm5745a3.htm

. 21 U.S. Department of Health and Human Services. “The health consequences of smoking: a report of the Surgeon General.” Atlanta, GA, U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Ce nter for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2004. 22 Fiore, Michael C., Goplerud, Eric, Shroeder, Steven A. (2010). The Joint Commission’s New Tobacco Cessation Measures

– Will Hospitals Do the Right Thing? N Eng l J Med 2012; 366:1172

- 1174 Available at : http://www.nejm.org/doi/full/10.1056/nejmp1115176

.CMS

- 1627

- P 123

significantly reduce the risk of developing tobacco

- related disease, 23 leading to decreases in cardiovascular disease, among other diseases, and, ultimately, mortality. Encouraging intervention would promote effective treatment of tobacco use, and may contribute to prevention of the many diseases that are associated with to bacco use. For these reasons, we included TOB

- 3/TOB

- 3a in our “List of Measures under Consideration for December 1, 2014.” The MAP provided input on the measure set and supported its inclusion in the IPFQR Program in its report “ Process and Approach for MAP Pre

Rulemaking Deliberations 2015” available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711

. Moreover, this measure set is NQF

- endorsed for the IPF setting in conformity with the statutory criteria for measure selection under section 1886(s)(4)(D)(i) of the Act. We invite public comments on our proposal to adopt the TOB

- 3 and TOB

- 3a measure set for the FY 2018 payment det ermination and subsequent years.
2. SUB

- 2 Alcohol Use Brief Intervention Provided or Offered and SUB

- 2a Alcohol Use Brief Intervention (NQF #1663) Individuals with mental health conditions experience substance use disorders (SUDs) at a much higher rate than the general population. Individuals with the most serious mental illnesses have the highest rates of SUDs. Co

- occurring SUDs often go undiagnosed and, without treatment, contribute to a longer persistence of disorders, poorer treatment outcomes, low er rates of medication adherence, and greater impairments to functioning.

23 U.S. Department of Health and Human Services. “The health consequences of smoking: a report of the Surgeon General.” Atlanta, GA, U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Sm oking and Health, 2004.CMS

- 1627

- P 124

Substance abuse, particularly alcohol abuse, is a significant problem in the elderly. Alcohol use disorders are the most prevalent type of addictive disorder in individuals ages 6 5 and over. 24 Roughly 6 percent of the elderly are considered to be heavy users of alcohol. 25 Alcohol abuse is often associated with depression and contributes to the etiology of many serious medical conditions, including liver disease and cardiovascular d isease. For these reasons, it is important to assess IPFs’ efforts to offer alcohol abuse treatment to those patients who screen positive for alcohol abuse.
SUB

- 2 includes “[p]atients 18 years of age and older who screened positive for unhealthy
alcohol use who received or refused a brief intervention during the hospital 26 stay.” 27 SUB

- 2a includes “[p]atients who received the brief intervention during the hospital stay.” 28 The measure set is chart

- abstracted and “is reported as an overall rate which includ es all patients to whom a brief intervention was provided, or offered and refused, and a second rate, a subset of the first, which includes only those patients who received a brief intervention.” 29 For more information on the measure specifications, we ref er readers to the Specifications Manual for National Hospital Inpatient Quality Measures at

24 Ross, S. (2005). Alcohol Use Disorders in the Elderly. Primary Psychiatry, 12(1):32

- 40. 25 AL Mirand and JW Welte. Alcohol consumption among the elderly in a general population, Erie County, New York. Am J Public Health. 1996 July; 86 (7) : 978

– 984. 26 Although the measure refers to “hospitals,” the measure is specified for all in

- patient settings. https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=12287 73989482

. 27 SUB

- 2 and SUB

- 2a Measure S pecifications, available at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=12287 73989482

. 28 Ibid

. 29 SUB

- 2 and SUB

- 2a Measure Specifications, available at https://www.qualitynet.org/dcs/ContentServer?c=Page&pa gename=QnetPublic%2FPage%2FQnetTier4&cid=12287 73989482

.CMS

- 1627

- P 125

https://www.qualitynet.org/dcs/ContentS erver?c=Page&pagename=QnetPublic%2FPage%2FQn etTier4&cid=1228773989482

. We believe that the addition of the SUB

- 2/SUB

- 2a measure set to the related existing substance abuse measure in the IPFQR Program would improve the overall quality of care that patients receive in IPF settings, as well as overall patient health outcomes. We previously adopted the SUB

- 1 measure (Alcohol Use Screening (SUB

- 1) (NQF #1661)) (78 FR 50890 through 50892). SUB

- 1 assesses “hospitalized patients 18 years of age and older who are screened during the hospital stay using a validated screening questionnaire for unhealthy alcohol use.” SUB

- 1 alone does not provide a full picture of an IPF’s response to this screening. However, when linked to SUB

- 2/SUB

- 2a, the IPF measure set depicts the rate at which patients are screened for potential alcohol abuse and the rate at which those who screen positive accept the offered interventions. Further, the adoption of SUB

- 2/SUB 2a could alert IPFs to gaps in treatment for interventions if rates a re low, which supports the development of quality improvement plans and better patient engagement in treatment. In addition, data for the SUB

2/SUB

- 2a measure set, in combination with the SUB

- 1 measure, would afford consumers useful information in choosin g among different facilities, particularly for patients who may require assistance with unhealthy alcohol use. Additionally, we believe that this measure set promotes the National Quality Strategy priority of Effective Prevention and Treatment for the le ading causes of mortality, starting with cardiovascular disease. As noted above, alcohol use disorders are the most prevalent type of addictive disorder in individuals ages 65 and over 30 and contribute to serious medical conditions,

30 Stephen Ross. Alcohol Use Disorders in the Elderly. Psychiatry Weekly (no date). Available at: http://www.p sychweekly.com/aspx/article/ArticleDetail.aspx?articleid=19

.CMS

- 1627

- P 126

including cardiovascula r disease and liver disease. Encouraging interventions would promote treatment of unhealthy alcohol use and may contribute to prevention of the many diseases that are associated with alcohol abuse, including cardiovascular disease. For these reasons, we included the SUB

- 2/SUB

- 2a measure set in our “List of Measures under Consideration for December 1, 2014.” The MAP provided input on the measure set and supported its inclusion in the IPFQR Program in its report “ Process and Approach for MAP Pre

Rulemaking Deliberations 2015” available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711

. Moreover, this measure set is NQF

- endorsed f or the IPF setting, in conformity with the statutory criteria for measure selection under section 1886(s)(4)(D)(i) of the Act. We invite public comments on our proposal to adopt the SUB

- 2/SUB

- 2a measure set for the FY 2018 payment determination and subsequent years. 3. Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0647) and Removal of HBIPS

- 6 Effective and timely communication of a p atient’s clinical status and other relevant information at the time of discharge from an inpatient facility is essential for supporting appropriate continuity of care. Establishment of an effective transition from one treatment setting to another is enhan ced by providing patients and their caregivers with sufficient information regarding treatment during hospitalization. Receiving discharge instructions can assist the patient in understanding how to maintain and enhance his/her care when discharged to hom e or any other site, and studies have shown that readmissions can be prevented by providingCMS

- 1627

- P 127

detailed, personalized information to patients pre

- discharge. 31 The Transition Record with Specified Elements Received by Discharged Patients (Discharges from on Inpatient Facility to Home/Self Care or Any other Site of Care) measure is a chart

- abstracted measure that captures the “[p]ercentage of patients, regardless of age, discharged from an inpatient facility to home or other site of care, or their caregiver(s) , who received a transition record (and with whom a review of all included information was documented) at the time of discharge.” 32 At a minimum, the transition record should include:

 Reason for inpatient admission;

 Major procedures and tests performed du ring inpatient stay and summary of results;

 Principal diagnosis at discharge;

 Current medication list;

 Studies pending at discharge;

 Patient instructions;

 Advance directive or surrogate decision maker documented or reason for not providing advance care plan;

 24

- hour/7

- day contact information, including physician for emergencies related to inpatient stay;

 Contact information for obtaining results of studies pending at discharge;

 Plan for follow

- up care; and

31 Jack BW, Chetty VK, Anthony D, et al. A reengineered hospital discharge program to decrease rehospitalization. Ann Intern Med 2009; 150:178

- 187. 32 Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) Measure Specifications. A vailable at http://www.qualityforum.org/Qps/ 0647

.CMS

- 1627

- P 128

 Primary physician, other health care pro fessional, or site designated for follow

- up care. 33 The measure was developed by the American Medical Association

– convened Physician Consortium for Performance Improvement (AMA

- convened PCPI), “ a national, physician

- led initiative dedicated to improving pat ient health and safety.” 34 For more information on this measure, including its specifications, we refer the readers to the AMA

- convened PCPI list of
measures at http://www.qualityforum.org/Qps/0647

. The Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any other Site of Care) measure seeks to prevent gaps in care transitions caused by the patient receiving inadequate or insufficient information that lead to avoidable adver se events and cost CMS approximately $15 billion due to avoidable patient readmissions. 35 We believe that public reporting of this measure would afford patients and their families or caregivers useful information in choosing among different facilities and would promote the National Quality Strategy priority of Communication and Care Coordination. As articulated by HHS, “Care coordination is a conscious effort to ensure that all key information needed to make clinical decisions is available to patients and providers. It is defined as the deliberate organization of patient care activities between 2 or more participants involved in a patient’s care

33 Ibid

. 34 See http://www.ama

- assn.org/ama/pub/physician

- resources/physician

- consortium

- performance

improvement/about

- pcpi.page ? The AMA

- PCPI “is nationally recognized for measure developme nt, specification and testing of measures, and enabling use of measures in electronic health records (EHRs) . . . [the organization] develops, tests, implements and disseminates evidence

- based measures that reflect the best practices and best interest of m edicine . . .” 35 Medicare Payment Advisory Commission. Promoting Greater Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf

.CMS

- 1627

- P 129

to facilitate appropriate delivery of health care services.” 36 This proposed measure would promote appropriate care coordination by specifying that patients discharged from an inpatient facility receive relevant and meaningful transition information. This measure also would promote Person and Family Engagement, “a set of behaviors by patients, family members, and health professionals and a set of organizational policies and procedures that foster both the inclusion of patients and family members as active members of the health care team and collaborative partnerships with providers and provider organizations.” 37 Th is proposed measure would inform patients of their status at discharge, empowering them to become active members in their care. Additionally, the inclusion in this measure of an advance care plan would support open communication of the patient’s, and his/ her caregiver’s/surrogate’s, wishes, resulting in improved patient

- provider communication. For these reasons, we included this measure in our “List of Measures under Consideration for December 1, 2014.” The MAP provided input on the measure and supported its inclusion in the IPFQR Program in its report “ Process and Approach for MAP Pre

- Rulemaking Deliberations 2015” available at http://www.qualityforum.org/WorkA rea/linkit.aspx?LinkIdentifier=id&ItemID=78711 . In addition, the MAP had previously suggested this measure as one that could fill a gap in communication between the provider and patient at discharge 38 and recommended that the measure be used for dual eligi ble patients (that is, patients with both Medicare and Medicaid

36 US DHHS. “National Healthcare Disparities Report 2013.” Available at: http://www.ahrq.gov/research/findings/nhqrdr/nhdr13/chap7.html

. 37 Guide to Patient and Family Engagement: Environmental Scan Report. May 2012. Agency for Healthcare Research and Quality. Rockville, MD. Available at: http://www.ahrq.gov/research/findings/final

reports/ptfamilyscan/ptfamily1.html

. 38 http://www.qualityfor um.org/Publications/2012/10/MAP_Families_of_Measures.aspx

.CMS

- 1627

- P 130

coverage), who comprise a significant beneficiary population served within IPFs. 39 Moreover, this measure set is NQF

- endorsed for the IPF setting, in conformity with the statutory criteria for

measure selection under section 1886(s)(4)(D)(i) of the Act. If finalized, we propose that this measure would replace the existing HBIPS

- 6 Post

Discharge Continuing Care Plan measure. 40 We believe that the Transition Record with Specified Elements Receive d by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) measure is a more effective and robust measure than
HBIPS

- 6 for use in the IPF setting. Specifically, HBIPS

- 6 requires discharge plans to only hav e 4 components:

 Reason for hospitalization;

 Principal diagnosis;

 Discharge medications; and

 Next level of care recommendations. 41
In contrast, the Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) measure requires additional elements, including those described below, which are intended to impro ve quality of care, decrease costs , and increase beneficiary engagement. First, the proposed measure requires the provider to communicate both studies pending at discharge as well as contact information so that patients or their families can obtain the r esults of

39 http://www.qualityforum.org/Publications/2014/08/2014_Input_on_ Quality_Measures_for_Dual_Eligible_Benefic iaries.aspx

. 40 In the FY 2013 IPPS/LTCH PPS final rule, we adopted HBIPS

- 6, beginning with the FY 2014 payment determination (77 FR 53650

- 53651). We refer readers to that rule for a detailed discussion of this mea sure. 41 See https://manual.jointcommission.org/releases/TJC2014A1/

.CMS

- 1627

- P 131

those studies. Approximately 40 percent of discharged patients have test results that are pending and about a quarter of such test results require further action that, if not taken in a timely manner, could result in potentially avoidable negati ve outcomes. 42 HBIPS

- 6 does not require providers to specify s tudies pending at discharge. Second, the transition record is also required to contain a list of major procedures and tests that were performed during the hospitalization and summary results. HBIPS

- 6 does not include this requirement. We believe it is important for a patient to understand which tests were performed on him/her and for what purpose, understanding the outcome and consequences of these tests. This knowledge may serve to empower patients to seek additional care or follow

- up when necessary, reducing the risk of avoidable consequences and readmissions. Third, the transition record in the proposed measure is required to include patient instructions while HBIPS

- 6 has no such requirem ent. Without instructions, the patient may not take the necessary steps for recovery, leading to complications and/or readmissions. Fourth, the proposed measure requires both of the following: (1) 24

- hour/7

- day contact information including physicians fo r emergencies related to inpatient stay; and (2) the primary physician, other health care professional, or sites designated for follow

- up care. HBIPS

- 6 does not have these requirements. Again, this information can lead to reduced complications and an inc reased likelihood of appropriate follow

- up care, resulting in reduced readmissions. Finally, the elements required for the proposed transition record measure are far better aligned than HBIPS

- 6 with the elements required in the Summary of Care record required by the Electronic Health Record (EHR) Incentive Program for eligible hospitals a nd critical access

42 Kripalani S, LeFevre F, Phillips CO, et al. Deficits in communication and information transfer between hospital bas ed and primary care physicians: implications for patient safety and continuity of care. JAMA 2007;297(8):831

- 841.CMS

- 1627

- P 132

hospitals and with the guidance on discharge planning provided by the Medicare Learning Network available at https://www.cms.gov/Outreach

- and

- Education/Medicare

- Learning

Network

- MLN/MLNProducts/Downloads/Discharge

- Planning

- Booklet

- ICN908 184.pdf. In summary, we believe that the Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) measure is more robust than HBIPS

- 6 because it includes these and other elements that are currently absent from HBIPS

- 6. Therefore, we propose to adopt the Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Ca re) measure for the FY 2018 payment determination and subsequent years, and, if adopted, to remove HBIPS

- 6. We invite public comments on these proposals. 4. Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) ( NQF # 0648) and removal of HBIPS

- 7 The literature shows infrequent communication between hospital physicians and primary care practitioners and that the availability of discharge summaries at the patient’s first post

discharge v isit with the primary care practitioner is low, which affects the quality of care provided to patients. 43 The Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) measure ( NQF # 0648) i s a chart

abstracted measure developed by AMA

- convened PCPI to narrow gaps in care transition that result in adverse health outcomes for patients and cost CMS about $15 billion due to

43 Kripalani S, LeFevre F, Phillips CO, et al. Deficits in communication and information transfer between hospital based and primary care physi cians: implications for patient safety and continuity of care. JAMA 2007;297(8):831

- 841.CMS

- 1627

- P 133

readmissions, 44 as discussed above. This measure captures the “[p]ercent age of patients, regardless of age, discharged from an inpatient facility to home or any other site of care for whom a transition record was transmitted to the facility or primary physician or other health care professional designated for follow

- up care wi thin 24 hours of discharge.” 45 For more information on this measure, including its specifications, we refer the readers to http://www.qualityforum.org/Qps/0648

. We believe that public reporting of this measure will afford consumers, and their families or caregivers, useful information in choosing among different facilities because it communicates how quickly a summary of the patient’s record will be transmitted to his or her other treating facilities and physicians, improvi ng care, as outlined above. We further believe that this measure will promote the National Quality Strategy priority of Communication and Care Coordination. As discussed above, according to HHS, “Care coordination is a conscious effort to ensure that all key information needed to make clinical decisions is available to patients and providers. It is defined as the deliberate organization of patient care activities between 2 or more participants involved in a patient’s care to facilitate appropriate delive ry of health care services.” 46 This proposed measure enables a patient’s primary care physician or other healthcare practitioner to timely receive a transition record of the inpatient hospitalization. For these reasons, we included this measure in our “L ist of Measures under Consideration for December 1, 2014.” The MAP provided input on the measure and supported its inclusion in

44 Medicare Payment Advisory Commission. Promoting Greater Efficiency in Medicare. June 2007. Available at: http://www.medpac.gov/documents/reports/Jun07_EntireReport.pdf

. 45 Timely Transmission of Transition Record (Discharged from Inpatient Facility to Home/Self Care or Any Other Site of Care), available at http://www.ama

- assn.sorg/apps/listserv/x

- check/qmeasure.cgi?submit=PCPI 46 US DHHS. “National Healthcare Disparities Report 2013.” Available at: http://www.ahrq.gov/research/findings/nhqrdr/nhdr13/chap7.html

.CMS

- 1627

- P 134

the IPFQR Program ( http://www.q ualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78711 ). In addition, the MAP had prev iously suggested this measure as one that could fill a gap in communication 47 and recommended that the measure be used for dual eligible patients ( that is , p atients with both Medicare and Medicaid coverage), who comprise a significant beneficiary population served within IPFs. 48 Moreover, this measure set is NQF

- endorsed for the IPF setting, in conformity with the statutory criteria for measure selection under section 1886(s)(4)(D)(i) of the Act. If finalized, we propose that this measure would replace the existing HBIPS

- 7 Post Discharge Continuing Care Plan Transmitted to the Next Level of Care Provider Upon Discharge

measure. 49 HBIPS

- 7 requires that the conti nuing care plan be transmitted to the next care provider no later than the fifth day post discharge. 50 The Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) measure requires transmi ssion to the next level of care within 24 hours of discharge. More timely communication of vital information regarding the inpatient hospitalization results in better care, reduction of systemic medical errors, and improved patient outcomes. Studies show that the risks of re

- hospitalization are lower when primary care providers have access to patients’ post

- discharge records at the first post

- discharge visit, 51 , 52 which may be within a day (or days)

47 http://www.qualityforum.org/Publications/ 2012/10/MAP_Families_of_Measures.aspx

. 48 http://www.qualityforum.org/Publications/2014/08/2014_Input_on_Quality_Measures_for _Dual_Eligible_Benefic iaries.aspx

. 49 In the FY 2013 IPPS/LTCH PPS final rule, we adopted HBIPS

- 7 Post Discharge Continuing Care Plan Transmitted to the Next Level of Care Provider Upon Discharge, beginning with the FY 2014 payment determination (77 FR 5365 1

- 53652). We refer readers to that rule for a detailed discussion of this measure. 50 https://manual.jointcommission.org/releases/TJC2014A1/

. 51 van Walraven C, Seth R, Austin PC, Laupac is A. (2002). Effect of discharge summary availability during postdischarge visits on hospital readmission. Journal of General Internal Medicine 17:186

– 192.CMS

- 1627

- P 135

of discharge. Critically, the availability of the dischar ge record to the next level provider within 24 hours after discharge supports more effective care coordination and patient safety, since a delay in communication can result in medication or treatment errors. Thus, we believe that replacing HBIPS

- 7 with th e Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) measure would increase the quality of care provided to patients, reduce avoidable readmissions, and increase patient safety. We i nvite public comments on our proposals to adopt the Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) measure for the FY 2018 payment determination and subsequent years and, if adop ted, our removal of HBIPS

- 7. 5. Screening for Metabolic Disorders Studies show that both second generation antipsychotics (SGAs) and antipsychotics increase the risk of metabolic syndrome. 53 Metabolic syndrome involves a cluster of conditions that occur together, including excess body fat around the waist, high blood sugar, high cholesterol, and high blood pressure, and increases the risk of coronary artery disease, stroke, and type 2 diabetes. Recognizing this problem, in February 2004, the American Dia betes Association (ADA), the American Psychiatric Association (APA), the American Association of Clinical Endocrinologists, and the North American Association for the Study of Obesity released a consensus statement finding that the use of SGAs “have been a ssociated with reports of

52 Jack BW, Chetty VK, Anthony D, et al. (2009). A reengineered hospital discharge program to decre ase rehospitalization. Ann Intern Med

. 150 (3),178

- 187

.
53 The American Diabetes Association, APA, the American Association of Clinical Endocrinologists, and the North American Association for the Study of Obesity (2004). Consensus development conference on antipsychotic drugs and obesity and diabetes. Diabetes Care, 27 , 596

- 601. Marder, Stephen R., M.D., et al. Physical Health Monitoring of Patients with Schizophrenia. Am J Psychiatry. 2004 Aug;161(8):1334

- 49.CMS

- 1627

- P 136

dramatic weight gain, diabetes (even acute metabolic decompensation, for example, diabetic ketoacidosis [DKA]), and an atherogenic lipid profile (increased LDL cholesterol and triglyceride levels and decreased HDL cholesterol) . . . [and] [s]ubsequent drug surveillance and retrospective database analyses suggest that there is an association between specific SGAs and both diabetes and obesity.” 54 SGAs also have an effect on serum lipids and could result in dyslipidemia. 55 Given th ese concerns, the group recommended that “baseline screening measures be obtained before, or as soon as clinically feasible after, the initiation of any antipsychotic medication,” including body mass index (BMI), blood pressure, fasting plasma glucose, and fasting lipid profile. 56 Although the consensus statement specifically discussed the issues with SGAs, the ADA also emphasized that “ all patients receiving antipsychotic medications [should] be screened” 57 and subsequent studies have found that “[i]n schiz ophrenic patients, the level of lipid profile had been increased in both atypical and conventional antipsychotic users” 58 Numerous other organizations have also made similar recommendations. 59 For example, the National Association of State Mental Health Program Directors Medical Directors Council

54 The American Diabetes Association, APA, the American Association of Clinical Endocrinologists, and the North American Association for the Study of Obesity (2004). Consensus development conference on antipsychotic drugs and obesity and diabetes. Diabetes Care, 27 , 596

- 601. 55 Ibid

. 56 Ibid. 57 The American Diabetes Association (2006). Antipsychotic Medications and the Risk of Diabetes and Cardiovascular Disease. Available at: http://professional.diabetes.org/admin/UserFiles/file/CE/AntiPsych%20Meds/Professional%20Tool%20%231(1).pdf (emphasis added). 58 Roohafsza, H, Khani, A, Afshar, H, Garakyaraghi, A, Ghodsi, B. Lipid profile in antipsychotic drug users: A comparative study. ARYA Atheroscler. May 2013; 9(3): 198

– 202 (emphasis added)

. 59 De Hert, M., Dekker, J.M. & Wood, D. (2009). Cardiovascular disease and diabetes in people with severe mental illness. Position statement from the European Psychiatric Association (EPA), supported by the European Association for the Study of Diabetes (EASD) and the European Society of Cardiology (ESC). Eur Psychiatry , 24 , 412

- 424; Zolnierek, C .D. (2009). Non

- psychiatric hospitalization of people with mental illnesses: A systematic review. Journal of Advanced Nursing, 65 (8), 1570

- 1583.CMS

- 1627

- P 137

notes, “the second generation antipsychotic medications have become more highly associated with weight gain, diabetes, dyslipidemia, insulin resistan ce, and the metabolic syndrome.” They recommend the same screening as the consensus statement (BMI, blood pressure, fasting plasma glucose, and fasting lipid profile) and emphasize that this screening is “the standard of care for the general population.” 60 Likewise, the Mount Sinai Conference, 61 convened in 2002, recommended that, for every patient with schizophrenia, “regardless of the antipsychotic prescribed,” mental health providers should, among other things: (1) monitor and chart BMI; (2) measure pla sma glucose levels (fasting or HbA1c); and (3) obtain a lipid profile. 62 Despite these consensus statements and guidelines, many of which are over a decade old, screening for metabolic syndrome remains low and there appears to be disagreement regarding where the responsibility for this screening lies. 63 Studies show a systematic lack of metabolic risk monitoring of patients who have been prescribed antipsychotics. 64 Screening for metabolic syndrome may reduce the risk of preventable adverse events and im prove the physical health

60 National Association of State Mental Health Program Directors Medical Directors Council (2006). Morbidity and mortality in people with serious mental illness. Available at: http://www.nasmhpd.org/docs/publications/MDCdocs/Mortality%20an d%20Morbidity%20Final%20Report%208.1 8.08.pdf

. 61 The Mount Sinai Conference was conferred to “focus on specific questions regarding the pharmacotherapy of schizophrenia . . . Participants in the conference were selected based on their knowledge of and contr ibutions to the literature in this area . . . Also in attendance [were] various groups concerned with improving psychopharmacology in routine practice settings.” Marder, Stephen R., M.D., et al. Physical Health Monitoring of Patients with Schizophrenia. Am J Psychiatry. 2004 Aug;161(8):1334

- 49. 62 Marder, Stephen R., M.D., et al. Physical Health Monitoring of Patients with Schizophrenia. Am J Psychiatry. 2004 Aug;161(8):1334

- 49. 63 See e.g., Brooks, Megan. “Metabolic Screening in Antipsychotic Users: Whose Job Is It?” Medscape Medical News . 8 May 2012. Ava ilable at http://www.medscape.com/viewarticle/763468

. Mittal D , Li C , Viverito K , Williams JS , Landes RD , Thapa PB , Owen R . Monitoring for met abolic side effects among outpatients with dementia receiving antipsychotics. Psychiatr Serv. 2014 Sep 1;65(9):1147

- 53. 64 Nasrallah, H. A, MD (2012). There is no excuse for failing to provide metabolic monitoring for patients receiving antipsychotics. Current Psychiatry, 4 (citing Mitchell AJ, Delaffon V, Vancampfort D, et al.Guideline concordant monitoring of metabolic risk in people treated with anti psychotic medication: systematic review and meta

- analysis of screening practices. Psychol Med. 2012;42(1):125

- 147.)CMS

- 1627

- P 138

status of the patient. Therefore, we believe it is necessary to include a measure of metabolic syndrome screening in the IPFQR Program. The Screening for Metabolic Disorders measure is a chart

- abstracted measure developed by CM S and defined as a percentage of discharges from an IPF for which a structured metabolic screening for 4 elements was completed in the past year. The denominator includes IPF patients discharged with one or more routinely scheduled antipsychotic medicatio ns during the measurement period. The numerator is the total number of patients who received a metabolic screening either prior to, or during, the index IPF stay. The screening must contain four tests: (1) BMI; (2) blood pressure; (3) glucose or HbA1c; a nd (4) a lipid panel

— which includes total cholesterol (TC), triglycerides (TG), high density lipoprotein (HDL), and low density lipoprotein (LDL

- C) levels. The screening must have been completed at least once in the 12 months prior to the patient’s date o f discharge. Screenings can be conducted either at the reporting facility or another facility for which records are available to the reporting facility. The following patients are excluded from the measure: (1) patients for whom a screening could not be completed within the stay due to the patient’s enduring unstable medical or psychological condition; and (2) patients with a length of stay equal to or greater than 365 days, or less than 3 days. In section F.3. below, we propose a sampling methodology f or this and certain other measures. Testing of this measure demonstrated that performance on the metabolic screening measure was low, on average, across the tested IPFs. The measure’s average performance rate of 42 percent signals a strong opportunity f or improvement. During testing, the metabolic screening measure also demonstrated nontrivial variation in performance among IPFs (6.2

– 98.6 percent). In addition, it demonstrated near

- perfect agreement between chart abstractors (kappaCMS

- 1627

- P 139

of 0.93 for the meas ure numerator). 65 We included the Screening for Metabolic Disorders measure (then titled “IPF Metabolic Screening”) in our “Measures Under Consideration List” in December 2013. The MAP did not recommend this measure, noting, “a different NQF

- endorsed mea sure better addresses the needs of the program.” 66 However, the different NQF

- endorsed measure was not identified by the MAP, and we are unaware of any screening measures for metabolic syndrome that are NQF

endorsed. We note that, when presented to the MA P, the denominator for this measure was the “total number of psychiatric inpatients admitted during the measurement period.” Based on testing and further feedback on the measure, we revised the measure by reducing its application to only those patients on antipsychotic medication; the denominator for the measure is now “IPF patients discharged with one or more routinely scheduled antipsychotic medications during the measurement period.” We believe that this change was appropriate because, as discussed abo ve, the patients most at risk for metabolic syndrome are those receiving antipsychotics and the APA and other consensus organizations recommend this screening for patients on antipsychotics. Furthermore, by limiting the application of the measure only to those receiving antipsychotics, we believe that we have reduced provider burden, both in terms of possible changes in practice that might result from the measure, as well as the direct burden resulting from its collection and reporting. We believe that th is measure promotes the National Quality Strategy priority of Making

65 Development of Quality Measures for Inpatient Psychiatric Facilities. February 2015. U.S. Department of Health and Human Services, Assista nt Secretary for Planning and Evaluation, Office of Disability, Aging, and Long

- term Care Policy. Page xi, at http://aspe.hhs.gov/daltcp/reports/2015/ipf.cfm

. 66 MAP 2014 Recommendations on Mea sures for More than 20 Federal Programs, 179, at http://www.qualityforum.org/Publications/20 14/01/MAP_Pre

Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx

.CMS

- 1627

- P 140

Care Safer, which seeks to reduce risk that is caused by the delivery of healthcare. As discussed above, antipsychotics have been shown to be related to metabolic syndrome. The Screenin g for Metabolic Disorders measure is aimed at the prevention and treatment of serious side effects of these drugs. Section 1886(s)(4)(D)(ii) of the Act authorizes the Secretary to specify a measure that is not endorsed by NQF as long as due consideration i s given to measures that have been endorsed or adopted by a consensus organization identified by the Secretary. We have been unable to identify any measures addressing screening for metabolic syndrome for the IPF setting that have been endorsed by the NQF or adopted by any other consensus organization. We believe the proposed measure for the Screening for Metabolic Disorders meets the measure selection exception requirement under section 1886(s)(4)(D)(ii) of the Act. We invite public comments on our pro posal to adopt this measure for the FY 2018 payment determination and subsequent years. 6. Summary of Measures Proposed for Adoption and Removal for FY 2018 and Subsequent
Years The measures that we are proposing to add to the IPFQR Program for the FY 201 8 payment determination and subsequent years are set forth in Table 20, below.

Table 20
- IPFQR Program Measures Proposed for the FY 2018 Payment

Determination and Subsequent Years National Quality Strategy Priority NQF # Measure ID Measure Effective Prevention and Treatment 1656 TOB

- 3 and TOB

- 3a Tobacco Use Treatment Provided or Offered at Discharge and the subset measure Tobacco Use Treatment at Discharge Effective Prevention and 1663 SUB

- 2 and SUB

- 2a Alcohol Use Brief Intervention Provided or Offered and SUB

- 2aCMS

- 1627

- P 141

Table 20
- IPFQR Program Measures Proposed for the FY 2018 Payment

Determination and Subsequent Years National Quality Strategy Priority NQF # Measure ID Measure Treatment Alcohol Use Brief Intervention Communication and Care Coordination; Person and Family Engagement 0647 N/A Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to H ome/Self Care or Any Other Site of Care)
Communication and Care Coordination 0648 N/A Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) Making Care Safer N/A N/A Screening for Metabolic Disorders
The measures that we are proposing to remove beginning with the FY 2018 payment determination are set forth in Table 21, below.
Table 21
- IPFQR Program Measures Proposed to be Removed for the FY 2018

Payment Determination and Subsequent Years NQF # Measure ID Measure

0557 HBIPS

- 6 Post

- Discharge Continuing Care Plan (Removal of measure contingent upon adoption of proposed measure, Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care))

0558 HBIPS

- 7 Post Discharge Continuing Care Plan Transmitted to the Next Level of Care Provider Upon Discharge (Removal of measure contingent upon adoption of proposed measure, Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care))CMS

- 1627

- P 142

If these proposals are adopted, the number of measures for the FY 2018 IPFQR Program would total 16, as set forth in Table 22, below.

Table 22

– Previously Adopted and Proposed Measures for FY 2018 and Subsequent Years NQF # Measure ID Measure 0640 HBIPS

- 2 Hours of Physical Restraint Use 0641 HBIPS

- 3 Hours of Seclusion Use 0560 HBIPS

- 5 Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification 0576 FUH Follow

- up After Hospitalization for Mental Illness 1661 SUB

- 1 Alcohol Use Screening 1663 SUB

- 2 and SUB

- 2a Alcohol Use Brief Intervention Provided or Offered and SUB

- 2a Alcohol Use Brief Intervention* 1651 TOB

- 1 Tobacco Use Screening
1654 TOB

- 2

TOB

- 2a Tobacco Use Treatment Provided or Offered and Tobacco Use Treatment 1656 TOB

- 3 and TOB

- 3a Tobacco Use Treatment Provided or Offered at Discharge and the subset measure Tobacco Use Treatment at Discharge* 1659 IMM

- 2 Influenza Immunization 0647 N/A Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care)* 0648 N/A Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care)* N/A N/A Screening for Metabolic Disorders* N/A N/A Influenza Vaccination Coverage Among Healthcare Personnel N/A N/A Assessment of Patient Experience of Care N/A N/A Use of an Electronic Health Record *Measures proposed for the FY 2018 payment determination and future years.CMS

- 1627

- P 143

E. Possible IPFQR Program Measures and Topics for Future Consideration As we have previously indicated (79 FR 45974 through 45975), we seek to develop a comprehensive set of quality measures to be available for widespread use for informed decision

making and quality improvement in the IPF setting. Therefore, through future rulemaking, we intend to propose new measures that will help further our goals of achieving better health care and improved health for Medicare beneficiaries wh o obtain inpatient psychiatric services through the widespread dissemination and use of quality information. We are developing a 30

- day psychiatric readmission measure that is similar to the readmission measures currently in use for other CMS quality repo rting programs, such as the Hospital Inpatient Quality Reporting Program. We anticipate that we will recommend additional measures for development or adoption in the future. We intend to develop a measure set that effectively assesses IPF quality across the range of services and diagnoses, encompasses all of the goals of the CMS quality strategy, addresses measure gaps identified by the MAP and others, and minimizes collection and reporting burden. We may also propose the removal of some measures in the future. We invite public comment on measures that we should consider. F. Changes to Reporting Requirements We are proposing to make the following changes to our reporting requirements for FY 2017 and subsequent years:

 Requiring that measures be reporte d as a single yearly count rather than by quarter and age; and

 Requiring that aggregate population counts be reported as a single yearly number ratherCMS

- 1627

- P 144

than by quarter.
F or FY 2018 and subsequent years we are also proposing to make one change, allowing

u niform sampling requirements for certain measures. 1. Proposed Changes to Reporting by Age and Quarter for FY 2017 Payment Determination and Subsequent Years In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53655 through 53656), we finalized our policy tha t IPFs must submit data for chart

- abstracted measures to the Web

- Based Measures Tool on an annual basis aggregated by quarter. We also finalized our policy that IPFs must submit data as required by The Joint Commission, which calls for IPFs to submit data for measures by age group. Since then, we have learned that obtaining data for each quarter and by age is burdensome to providers and the resultant number of cases is often too small to allow public reporting. That is, we do not report data on Hospital Compare for measures with fewer than 11 cases; reporting by age and quarter often causes the number of cases to fall below 11. For example, for HBIPS

- 5, in Quarter 2 of 2013, only 5.75 percent of the data were reportable. Likewise, in Quarter 3 and Quart er 4 of 2013, for HBIPS

- 5, only 5.5 percent of the data were reportable. Therefore, beginning with FY 2017, we propose to require facilities to report data for chart

- abstracted measures to the Web

- Based Measures Tool on an aggregate basis by year, rathe r than by quarter, and to discontinue the requirement for reporting by age group. If adopted, we would require IPFs to report a single aggregate measure rate for each measure annually for each payment determination. We believe that this change would re duce provider burden because IPFs would report a single rate for each measure. In addition, we do not believe that quarterly data or data stratifiedCMS

- 1627

- P 145

by age are necessary for quality improvement activities. We are able to differentiate, and the public is able to view on Hospital Compare, those IPFs that perform well on measures from those for which quality improvement activities may be necessary based on an annual aggregate rate submission. We note, however, that in the future, if our evolving measures se t, quality improvement goals, and experience with the program indicate a change is needed, we may reevaluate and reinstate the requirement for quarterly reporting. In Table 23, below, we set forth the proposed quality reporting and submission timelines
f or the FY 2017 payment determination and subsequent years for all the measures except FUH and the Influenza Vaccination Coverage among Healthcare Personnel measures. We note that FUH is claims

- based, and therefore does not require additional data submissi on. The Influenza Vaccination Coverage among Healthcare Personnel measure is reported to the Centers for Disease Control and Prevention, and we refer readers to the FY 2015 IPF PPS final rule for more information on the reporting timeline for this measure (79 FR 45969).

Table 23
- Proposed Quality Reporting Periods and Timeframes for the FY 2017 Payment Determination and Subsequent Years Payment Determination

(FY) Reporting Period for Services Provided Data Submission Timeframe 2017 January 1, 2015

- December 31, 2015 July 1, 2016

– August 15, 2016 We invite public comment on this proposal. 2. Proposed Changes to Aggregate Population Count Reporting for FY 2017 Payment Determination and Subsequent Years In the FY 2015 IPF PPS final rule (79 FR 45973), we finalized our policy that IPFs must submit aggregate population counts for Medicare and non

- Medicare discharges by age group, diagnostic group, and quarter, and sample size counts for measures for which s ampling is performed. In section V. F.1. of this proposed rule, we are proposing to only require measureCMS

- 1627

- P 146

reporting as an annual aggregate rate, rather than by quarter. Likewise , beginning with the FY 2017 payment determination , w e propose to require non - m easure data to be reported as an aggregate, yearly count rather . We invite public comment on this proposal. 3. Proposed Changes to Sampling Requirements for FY 2018 Payment Determination and Subsequent Years Measure specifications for the measures that we have adopted and propose to adopt allow sampling for some measures; however, for other measures, IPFs must report data for all discharges/patients. In addition, the sampling requirements sometimes vary by measure. In response to these policies, in the FY 2014 IPPS/LTCH PPS final rule, some commenters noted that different sampling requirements in the measures could increase burden on facilities because these differences would require IPFs to have varying policies and procedures in place for each

measure (78 FR 50901). Although we stated our belief that the importance of these measures and of gathering information for all discharges/patients outweighs the burden of various sampling requirements, we now believe that the additional measures proposed in thi s proposed rule tip the balance of benefit and burden. Therefore, and for the reasons provided below, we are proposing to allow a uniform sampling methodology both for measures that require sampling and for certain other measures. Specifically, we propos e to allow The Joint Commission/CMS Global Initial Patient Population sampling in Section 2.9_Global Initial Patient Population found
at https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQn etTier4&cid=1228773989482 . If this proposal is finalized, it will allow IPFs to take one, global sample for all measures specified in Table 24, thereby decreasing burden on these facilities and streamlining policies and procedures.CMS

- 1627

- P 147

In our current and proposed measure set, the measures for which we propose to allow The Joint Commission/CMS Global sampling would include those outlined in Table 24, below.

Table 24
- Measures to which Proposed Sampling Applies* NQF # Measure ID Measure 0560 HBIPS

- 5 Patients Discharged on Multiple Antipsychotic Medications with Appropriate Justification 1661 SUB

- 1 Alcohol Use Screening 1663 SUB

- 2 and SUB

- 2a Alcohol Use Brief Intervention Provided or Offered and SUB

- 2a Alcohol Use Brief Intervention** 1651 TOB

- 1 Tobacco Use Screening
1654 TOB

- 2

TOB

- 2a Tobacco Use Treatment Provided or Offered and Tobacco Use Treatment 1656 TOB

- 3 and TOB

- 3a Tobacco Use Treatment Provided or Offered at Discharge and the subset measure Tobacco Use Treatment at Discharge** 1659 IMM

- 2 Influenza Immunization 0647 N/A Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care)** 0648 N/A Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care)** N/A N/A Screening for Metabolic Disorders** *Measures proposed for removal have not been included in this table. If these measures (HBIPS

- 4, HBIPS

- 6, and HBIPS

- 7) are not removed, the sampling methodology would also apply to their collection and submission. **Measures proposed for the FY 2018 payment determination and future years. In section F.1. of this proposed rule, we are proposing to require reporting on measures as a yearly count rather than by quarter. Because The Joint Commission/CMS Global sampling guidelines specify sampling by quarter, we propose to modify their sampling guidelines by multiplying the “n umber of cases in the initial patient population” and the “number of cases to be sampled” by 4. In addition, since we require all IPFs to report data on all chart

- abstracted measures even when the population size for a given measure is small or zero (78 FR 50901), weCMS

- 1627

- P 148

have modified the table to require reporting regardless of the numb er of cases. Thus, we propose the following sampling guidelines for the measures above:

Number of cases in initial patient

population Number of records to be sampled > 6,117 1,224

3,057

- 6,116 20% of initial patient population 609

- 3,056 609 0

- 608 All cases
As stated above, we believe this proposal will simplify processes and procedures for IPFs because uniform requirements will promote streamlined procedures and reporting. We also believe the proposal will decrease burden by allowing IPFs to identify a single, initial patient population for all of the measures specified in Table 24 from which to calculate the sample size. Furthermore, we do not believe this approach will reduce quality improvement. Sampling calculations ensure that enough da ta are represented in the sample to determine accurate measure rates. Therefore, even with sampling, we believe that CMS, IPFs, and the public would be able to differentiate those IPFs who perform well on measures from those who do not. We invite public comment on this proposal, which would begin with the FY 2018 payment determination. G. Public Display and Review Requirements We are not proposing any changes to the public display and review requirements for the FY 2018 payment determination and subseque nt years and refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50897 through 50898) for more information.CMS

- 1627

- P 149

H. Form, Manner, and Timing of Quality Data Submission
1. Procedural and Submission Requirements We are not proposing any changes to the procedural and submission requirements for the FY 2018 payment determination and subsequent years and refer readers to the FY 2014 IPPS/LTCH PPS final rule (77 FR 50898 through 50899) for more information on these previously finalized requirements.
2. Pr oposed Change to the Reporting Periods and Submission Timeframes In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50901) , we finalized requirements for reporting periods and submission timeframes for the IPFQR Program measures . We are proposing one change to these requirements, as discussed above in section V. F.1. of this proposed rule. Specifically, we are proposing to no longer require that measure rates be reported quarterly and by age, but to only require an aggregate, yearly count. 3. Population and Sampling In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53657 through 53658) and FY 2014 IPPS/LTCH PPS final rule (78 FR 58901 through 58902), we finalized policies for population, sampling, and minimum case thresholds. We are proposing one change to t hese policies, as discussed above in section V. F.3. of this proposed rule. Specifically, we are proposing to allow uniform sampling on certain measures. 4. Data Accuracy and Completeness Acknowledgement (DACA) Requirements We are not proposing any chang es to the DACA requirements and refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658) for more information on these requirements. I. Reconsideration and Appeals Procedures In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658 through 5366 0), we adopted aCMS

- 1627

- P 150

reconsideration process, later codified at §412.434, whereby IPFs can request a reconsideration of their payment update reduction in the event that an IPF believes that its annual payment update has been incorrectly reduced for failure to meet all IPFQR Program requirements. We are not proposing any changes to the Reconsideration and Appeals Procedure and refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53658 through 53660) and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50953 ) for further details on the reconsideration process.
J . Exceptions to Quality Reporting Requirements We are not proposing any changes to the exceptions to quality reporting requirements and refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53 659 through 53660), where we initially finalized the policy as “Waivers from Quality Reporting,” and the FY 2015 IPF PPS final rule (79 FR 45978), where we re

- named the policy as “Exceptions to Quality Reporting Requirements” for more information. VI. Col lecti on of Information Requirements Under the Paperwork Reduction Act of 1995 (PRA), we are required to publish a 60

- day notice in the Federal Register and solicit public comment before a collection of information requirement is submitted to the Office of Management and Budget (OMB) for review and approval. To fairly evaluate whether an information collection should be approved by OMB, PRA section 3506(c )(2)(A) requires that we solicit comment on the following issues: ● The need for the information collection and its usefulness in carrying out the proper functions of our agency. ● The accuracy of our burden estimates. ● The quality, utility, and cla rity of the information to be collected.CMS

- 1627

- P 151

● Our effort to minimize the information collection burden on the affected public, including the use of automated collection techniques. We are soliciting public comment on each of the section 3506(c)(2)(A)

- requi red issues for the following information collection requirements (ICRs)

. A

. Wage Estimates We estimate that reporting data for the IPFQR Program measures can be accomplished by staff with a mean hourly wage of $16.42 per hour. 67 Under OMB Circular A

- 76, i n calculating direct labor, agencies should not only include salaries and wages, but also “other entitlements” such as fringe benefits

. 68 This Circular provides that the civilian position full fringe benefit cost factor is 36.25 percent. Therefore, using these assumptions, we estimate an hourly labor cost of $22.3 7 ($16.42 base salary + $5.9 5 fringe) . T he following table presents the mean hourly wage, the cost of fringe benefits (calculated at 36.25 percent of salary), and the adjusted hourly wage. Occupa tion Title Occupation

Code Mean Hourly

Wage ($/hr) Fringe Benefit

(at 36.25% in $/hr) Adjusted

Hourly Wage ($/hr) Medical Records and Health Information Technician 29

- 2071 16.42 5.95 $ 22.37

The B LS is “the principal Federal agency responsible for measuring labor market activity, working conditions, and price changes in the economy.” 69 Acting as an independent

67 http://www.bls.gov/ooh/healthcare/medical

- records

- and

- health

- information

- technicians.html

. 68 http://www.whitehouse.gov/omb/circulars_a076_a76_incl_tech_correction

.
69 http://www.bls.gov/bls/infohome.htm

.CMS

- 1627

- P 152

agency, the Bureau provides objective information for not only the government, but also for the public. The Bureau ’s National Occupational Employment and Wage Estimates describes Medical Records and Health Information Technicians as those responsible for organizing and managing health information data. Therefore, we believe it is reasonable to assume that these individuals would be tasked with abstracting clinical data for these measures. In addition, the Hospital IQR Program uses this wage to calculat e its burden estimates.
B

. ICRs Regarding the Inpatient Psychiatric Facility Quality Reporting (IPFQR) Program We refer readers to the FY 2015 IPF PPS final rule (79 FR 45978 through 45980) for a detailed discussion of the burden for the program requirements that we have previously adopted. Below, we discuss only the changes in burden resulting from the pro visions in this proposed rule. Although we propos e provisions that impact both the FY 2017 and FY 2018 payment determinations, a ll of our proposals begin to apply to facilities in FY 2016. For example, data collection for the proposed measures begins in FY 2016, and the changes to the reporting requirements take effect beginning with reporting that is required in the summer of FY 2016. For purposes of calculating burden, we will attribute the costs associated with the proposals to the year in which these costs begin; for the purposes of all of the pro visions in this proposed rule, that year is FY 2016.
1 . Changes in Time Requir ed to Chart

- Abstract Data B ased on Proposed Reporting Requirements As discussed in section V.F. of this pr eamble, w e are proposing the following 3 changes regarding how facilities should report data for IPFQR Program measures: (1) measures must be reported as a single yearly count rather than by quarter and age; (2) aggregate population counts must be reported as a single yearly number rather than by quarter; and (3) uniform samplingCMS

- 1627

- P 153

would be allowed for certain measures . W e believe that these changes w ill lead to a decrease in burden since facilities w ould only be required to enter one aggregate number for both the numerator and denominator for each measure and will be allowed to pull one sample used to calculate the measures specified in Table 24 of this p reamble. Consequently, we believe that the time required to chart

- abstract data for these measures w ould be reduced by 20 percent. Previously, we estimated 15 minutes to chart

abstract data for each case (79 FR 45979). Because of our proposed changes to sampling and reporting data, we are revising the figure and now estimate 12 minutes (0.20 x 15 minutes ), a change of

- 3 min or

- 0.05 hr.
2

. Estimated Burden of IPFQR Program Proposals In section V. of this pr eamble , we are proposing to adopt the followin g five measures:

 TOB

- 3

- Tobacco Use Treatment Provided or Offered at Discharge and the subset
measure TOB

- 3a Tobacco Use Treatment at Discharge (National Quality Forum (NQF) #1656);

 SUB

- 2

- Alcohol Use Brief Intervention Provided or Offered and the subset measure SUB

- 2a (NQF #1663);

 Transition Record with Specified Elements Received by Discharged Patients (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0647);

 Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0648); and

 Screening for Metabolic Disorders. In the same section, we are also proposing to remove the following 3 measures:

 HBIPS

- 4 Patients Discharged on Multiple Antipsychotic Medications;

 Hospital Based Inpatient Psychiatric Services (HBIPS)

- 6 Post

- Discharge ContinuingCMS

- 1627

- P 154

Care Plan (NQF #0557), if Transition Record with Specified Elements Received by Discharged Patients (Disch arges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) is adopted; and

 HBIPS

- 7 Post

- Discharge Continuing Care Plan Transmitted to the Next Level of Care Provider Upon Discharge (NQF #0558), if Timely Transmission of Transition Record (Discharges from an Inpatient Facility to Home/Self Care or Any Other Site of Care) (NQF #0648) is adopted. We believe that approximately 1,617 70 IPFs will participate in the IPFQR Program for requirements occurring in FY 2016 and subsequent years. Based on data from CY 2013, we believe that each facility will submit measure data on approximately 431 71 cases per year. Therefore, we estimate that adopting five measures and removing 3 measures (for a net result of
2 measures) will result in an increase in b urden of 17 2. 4 hours per facility (2 measures x (431 cases/measure x 0.20 hours/case)) or 278,77 0.80 hours across all IPFs (17 2. 4 hours/facility x 1,617 facilities) . The increase in costs is approximately $ 3,856.59 per IPF ($ 22.37 /hour x 17 2. 4 hours) or $ 6,236,102.80 across all IPFs ( 278,770.80 hours x $22.37 /hour ). Consistent with our estimates in the FY 2015 IPF PPS final rule (79 FR 45979), we believe the estimated burden for training personnel on our proposals for data collection and submission is 2 h ours per facility or 3,234 hours (2 hours/facility x 1,617 facilities) across all IPFs. Therefore, the cost for this training is $ 44.7 4 ($ 22.37 /h our x 2 hours) for each IPF or $ 72,344.58 ($ 22.37/hour x 3,234 h ours ) for all facilities.

70 In the FY 2015 IPF PPS final rule we estimated 1,626 IPFs and are adjusting that estimate by

- 9 to account for more recent data

. 71 In the FY 2015 IPF PPS final rule we estimated 556 cases per year and are adjusting that estimate by

- 125 to account for more recent data

.CMS

- 1627

- P 155

Finally, IPFs must submit to CMS aggregate population counts for Medicare and non

Medicare discharges by age group, and diagnostic group, and sample size counts for measures for which sampling is performed. As noted above, we are proposing five new measures beginning with t he FY 2018 payment determination. However, because, as further described above, we are eliminating reporting this non

- measure data by quarter for all measures, we believe that the addition of five measures leads to a net negligible change in bu rden associ ated with non

- measure data collection.
C. Summary of Annual Burden Estimates for Proposed Requirements
Table 25

- Proposed Annual Recordkeeping and Reporting Requirements Under OMB Control Number 0938
- 1171 (CMS
- 10432)

Preamble Section(s) Proposed

Action Respondents Responses (per respondent) Burden per

Response (hours) * Total

Annual Burden (hours) Labor

Cost of Reporting ($/hr) Total Cost

($) V.C. Remove

HBIPS

- 4

1,6 17 862 (431 cases/yr x 2 measures) 0.2 0 278,77 0.80 22.37 6,236,102.80 V. Remove

HBIPS

- 6 and HBIPS

- 7 V. Ad d NQF #

1656, # 1663, # 0647, # 0648, and Screening for Metabolic Disorders Training 1 2 3,234 72,344.58 Total

-- 1,617 863 2.2 282,004.8 22.37 6,308, 447 .38
D. ICRs Regarding the Hospital and Health Care Complex Cost Report (CMS

- 2552

- 10) This rule would not impose any new or revised collection of information requirements associated with CMS

- 2552

- 10 (as discussed under preamble section I II

. A

. 3.a.i. ). Consequently, the cost report does not require additional OMB review u nder the authority of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). The report’s information collection requirements and burden estimates are approved by OMB under control number 0938

- 0052.
E. Submission of PRA

- Related CommentsCMS

- 1627

- P 156

We submitted a copy of this proposed rule to OMB for its review of the rule’s information collection and recordkeeping requirements. The requirements are not effective until they have been approved by the OMB. To obtain copies of the supporting statement and any related forms for the proposed collections discussed above, please visit CMS’ Web site at www.cms.hhs.gov/Paperwork@cms.hhs.gov , or call the Reports Clearance Office at 410

– 786

– 1326. We invite public comment on these potential information collection r equirements. If you wish to comment, please submit your comments electronically as specified under the
ADDRESSES caption of this proposed rule and identify the rule (CMS

- 1627

- P).
PRA

- related comments must be received on/by June 23, 2015.
VII . Regulatory Impact Analysis A. Statement of Need This proposed rule would update the prospective payment rates for Medicare inpatient hospital services provided by IPFs for discharges occurring during the FY beginning October 1,
201 5, through September 30, 201 6

. We are applying the proposed FY 2012

- based IPF

- specific market basket increase of 2. 7 percent, less the productivity adjustment of 0. 6 percentage point as required by 1886(s)(2)(A)(i) of the Act, and further reduced by 0. 2 percentage point as required by section s 1886(s)(2)(A)(ii) and 1886(s)(3)( D ) of the Act . In this proposed rule, we propose to adopt an IPF

- specific market basket and to update the IPF labor

- related share; to adopt new OMB CBSA delineations for the FY 2016 IPF Wage Index; and to phase ou t the rural adjustment for 37 rural providers which would become urban providers as a result of the new CBSA delineations. Additionally, this rule reminds providers of the October 1, 2015 implementation ofCMS

- 1627

- P 157

the International Classification of Diseases, 10t h Revision, Clinical Modification (ICD

- 10

- CM/PCS) for the IPF prospective payment system, updates provider s on the status of IPF PPS refinements, and proposes new quality reporting requirements for the IPFQR Program. B. Overall Impact We have examined the impact of this proposed rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA) (Sept ember 19, 1980, Pub. L. 96

- 354), section 1102(b) of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995; Pub. L. 104

- 4), Executive Order 13132 on Federalism (August 4, 1999) and the Congressional Review Act (5 U .S.C. 804(2)). Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). A regulatory impact analysis (RIA) must be prepared for a major rules with economically significant effects ($100 million or more in any 1 year). This proposed rule is n ot designated as economically “significant” under section 3(f)(1) of
Executive Order 12866. We estimate that the total impact of these changes for FY 2016 payments compared to FY 2015 payments will be a net increase of approximately $ 80 million. This r eflects a $ 9 5 million increase from the update to the payment rates, as well as a $ 15 million de crease as a result of the update to the outlier threshold amount. Outlier payments are estimated to decrease from 2.3 percent in FY 2015 to 2.0 percent of total IPF payments in FY 2016.CMS

- 1627

- P 158

The RFA requires agencies to analyze options for regulatory relief of small entities if a rule has a significant impact on a substantial number of small entities. For purposes of the RFA, small entities include small businesses , nonprofit organizations, and small governmental jurisdictions. Most IPFs and most other providers and suppliers are small entities, either by nonprofit status or having revenues of $7 .5 million to $ 38.5 million or less in any 1 year , depending on industry classification (for details, refer to the SBA Small Business Size Standards found at http://www.sba.gov/sites/default/files/files/Size_Standards_Ta ble.pdf ), or being nonprofit organizations that are not dominant in their markets. Because we lack data on individual hospital receipts, we cannot determine the number of small proprietary IPFs or the proportion of IPFs' revenue derived from Medicare paym ents. Therefore, we assume that all IPFs are considered small entities. The Department of Health and Human Services generally uses a revenue impact of 3 to 5 percent as a significance threshold under the RFA. As shown in Table 2 6 , we estimate that the overall revenue impact of this proposed rule on all IPFs is to i ncrease Medicare payments by approximately 1. 6 percent . As a result, since the estimated impact of this proposed rule is a net increase in revenue across almost all categories of
IPFs , the Se cretary has determined that this proposed rule would have a positive revenue impact on a substantial number of small entities. MACs are not considered to be small entities. Individuals and States are not included in the definition of a small entity.
In a ddition, section 1102(b) of the Social Security Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provision s of section 60 3 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that isCMS

- 1627

- P 159

located outside of a metropolitan statistical area and has fewer than 100 beds. As discussed in detail below, the rates and po licies set forth in this proposed rule would not have an adverse impact on the rural hospitals based on the data of the 275 rural units and 68 rural hospitals in our database of 1,617 IPFs for which data were available. Therefore, the Secretary has determined that this proposed rule would not have a significant impact on the operations of a substantial number of small rural hospitals. Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any 1 year of $100 million in 1995 dollars, updated annually for inflation. In 201 5 , that threshold is approximatel y $14 4 million. This proposed rule will not impose spending costs on state, local, or tribal governments in the aggregate, or by the private sector, of $ 144 million or

more . Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on s tate and local governments, preempts s tate law, or otherwise has Federalism implications. As stated above, this proposed rule would not have a substantial effect

on s tate and local governments. C. Anticipated Effects We discuss the historical background of the IPF PPS and the impact of this proposed rule on the Federal Medicare budget and on IPFs. 1. Budgetary Impact As discussed i n the November 2004 and May 2006 IPF PPS final rules, we applied a budget neutrality factor to the Federal per diem base rate and ECT rate to ensure that totalCMS

- 1627

- P 160

estimated payments under the IPF PPS in the implementation period would equal the amount that

wo uld have been paid if the IPF PPS had not been implemented. The budget neutrality factor includes the following components: outlier adjustment, stop

- loss adjustment, and the behavioral offset. As discussed in the May 2008 IPF PPS notice (73 FR 25711), t he stop

- loss adjustment is no longer applicable under the IPF PPS.
A s discussed in section III.D.1. e . of this proposed rule , we are using the wage index and labor

- related share in a budget neutral manner by applying a wage index budget neutrality factor to the Federal per diem base rate and ECT rate. Therefore, the budgetary impact to the Medicare program of this proposed rule will be due to the estimated market basket update for FY 201 6 of
2. 7 percent (see section III.A.4. of this proposed rule) less the productivity adjustment of 0.6 percentage point required by section 1886 (s)(2)(A)(i) of the Act ; further reduced by the “other adjustment” of 0.2 percentage point under sections 1886(s)(2)(A)( ii) and 1886 (s)(3)( D ) of the
Act ; and the update to the outlier fixed dollar loss threshold amount. We estimate that the FY 2016 impact will be a net increase of $ 80 million in payments to IPF providers. This reflects an estimated $ 9 5 million increase fr om the update to the payment rates and a $ 15 million de crease due to the update to the outlier threshold amount to set total estimated outlier payments at 2.0 percent of total estimated payments in FY 2016. This estimate does not include the implementatio n of the required 2 percentage point reduction of the market b asket increase factor for any I P F that fails to meet the I P F quality reporting requirements (as discussed in section VII.C. 4

. below). 2. Impact on Providers To understand the impact of the cha nges to the IPF PPS on providers, discussed in this proposed rule , it is necessary to compare estimated payments under the IPF PPS rates and factorsCMS

- 1627

- P 161

for FY 2016 versus those under FY 2015. We determined the percent change of estimated FY
201 6 IPF PPS payments to FY 201 5 IPF PPS payments for each category of IPFs. In addition, for each category of IPFs, we have included the estimated percent change in payments resulting from the update to the outlier fixed dollar loss threshold amount ; the upda ted wage index data; the changes to wage index CBSAs; the changes to rural adjustment payments resulting from changes in rural or urban status, due to CBSA changes; the proposed labor

- related share ; and the estimated market basket update for FY 2016 , as ad justed by the productivity adjustment according to section 1886(s)(2)(A)(i) , and the “other adjustment” according to sections 1886(s)(2)(A)(ii) and 1886(s)(3)( D ) of the Act. To illustrate the impacts of the FY 2016 changes in this proposed rule , our analysis begins with a FY 201 5 baseline simulation model based on FY 201 4 IPF payments inflated to the midpoint of FY 201 5 using IHS Global Insight Inc.'s most recent forecast of the market basket update (see section III.A.4. of this proposed rule); the estimated outlier payments in FY 201 5 ; the CBSA de lineations for IPFs based on OMB’s MSA definitions after June 2003; the FY 2014 pre floor, pre - reclassified hospital wage index; the FY 2015 labor

- related share; and the FY 2015 percentage amount of the rural adjustment. During the simulation, the total estimated outlier payments are maintained at 2 percent of total IPF PPS payments. Each of the following changes is added incrementally to this baseline model in order for us to isolate the effects of ea ch change:

 The update to the outlier fix ed dollar loss threshold amount;

 The FY 201 5 pre - floor, pre

- reclassified hospital wage index without the revised OMB delineations ;CMS

- 1627

- P 162

 The FY 2015 updated CBSA delineations , based on OMB’s February 28, 2013 Bulletin
No. 13

- 01, as described in section III.D.1.c

. of this proposed rule, with the proposed blended FY
2016 IPF wage index ;

 The FY 2016 rural adjustment, accounting for changes to rural or urban status due to the updat ed CBSA delineations , including the phase

- out of the rural adjustment for the IPFs changing from rural to urban status , as described in section III.D. 1.d ;

 The proposed FY 201 6 labor

- related share ;

 The estimated market basket update for FY 201 6 of 2. 7 perce nt less the productivity adjustment of 0.6 percentage point reduction in accordance with section 1886(s)(2)(A)(i) of the Act and further reduced by the “other adjustment” of 0.2 percentage point in accordance with sections 1886(s)(2)(A)(ii) and 1886(s)(3)( D ) of the Act. Our final comparison illustrates the percent change in payments from F Y 201 5 (that is, October 1, 201 4, to September 30, 201 5 ) to FY 201 6 (that is, October 1, 201 5, to September 30, 201 6 ) including all the changes in this proposed rule.
Table 2 6
- IPF IMPACT Table for FY 2016 (% change in columns 3
- 9)

Facility by Type Number

of IPFs Outlier Wage

Index 1 CBSA 2 Change

in Rural Adjust
ment 3 Labor

Related Share (74.9%) 4 IPF

Market Basket Update 5 Total

Percent Change 6 (1) (2) (3) (4) (5) (6) ( 7 ) ( 8 ) ( 9 ) All Facilities 1,617

- 0.3 0.0 0.0 0.0 0.0 1.9 1.6
Total Urban 1,274

- 0.3 0.0 0.0 0.0 0.2 1.9 1.8 Total Rural 343

- 0.3 0.0

- 0.2 0.2

- 1.1 1.9 0.6
Urban unit 847

- 0.4 0.0 0.0 0.0 0.2 1.9 1.7 Urban hospital 427

- 0.1

- 0.1 0.1 0.0 0.1 1.9 1.9
Rural unit 275

- 0.3 0.1

- 0.2 0.2

- 1.1 1.9 0.5 Rural hospital 68

- 0.1 0.0

- 0.3 0.2

- 1.0 1.9 0.7 CBSA Change Urban to Urban 1,237

- 0.3 0.0 0.0 0.1 0.2 1.9 1.8CMS

- 1627

- P 163

Rural to Rural 340

- 0.3 0.0

- 0.2 0.1

- 1.1 1.9 0.4 Urban to Rural 3

- 0.1 3.1

- 0.4 16.2

- 1.1 1.9 20.1 Rural to Urban 37

- 0.2 0.1 2.8

- 4.1

- 0.9 1.9

- 0.5 By Type of Ownership: Freestanding IPFs Urban Psychiatric Hospitals Government 123

- 0.3 0.1 0.0 0.0 0.1 1.9 1.8 Non

- Profit 99

- 0.1 0.4 0.1 0.0 0.4 1.9 2.7 For

- Profit 205 0.0

- 0.3 0.1 0.0 0.0 1.9 1.6 Rural Psychiatric Hospitals Government 36

- 0.1 0.2

- 0.1 0.4

- 0.8 1.9 1.5 Non

- Profit 11

- 0.5

- 0.6 0.0 0.0

- 0.3 1.9 0.5 For

- Profit 21 0.0 0.0

- 0.6 0.1

- 1.3 1.9 0.1
IPF Units Urban Government 129

- 0.6

- 0.2

- 0.1 0.0 0.3 1.9 1.2 Non

- Profit 552

- 0.4 0.2 0.0

- 0.1 0.3 1.9 1.9 For

- Profit 166

- 0.3

- 0.2 0.0 0.0 0.0 1.9 1.3 Rural Government 69

- 0.2

- 0.1

- 0.3 0.1

- 1.3 1.9 0.0 Non

- Profit 142

- 0.3 0.2

- 0.2 0.3

- 0.9 1.9 0.8 For

- Profit 64

- 0.3 0.0

- 0.2 0.2

- 1.2 1.9 0.3 By Teaching Status: Non

- teaching 1,420

- 0.2

- 0.1 0.0 0.0

- 0.1 1.9 1.5 Less than 10% interns and residents to beds 110

- 0.3 0.2

- 0.1 0.0 0.5 1.9 2.1 10% to 30% interns and residents to beds 61

- 0.7 0.4

- 0.1 0.0 0.5 1.9 2.1 More than 30% interns and residents to beds 26

- 0.7 0.4 0.0 0.0 0.8 1.9 2.4 By Region: New England 108

- 0.3 0.8 0.0 0.0 0.7 1.9 3.2 Mid

- Atlantic 243

- 0.2 0.2

- 0.1 0.0 0.6 1.9 2.4 South Atlantic 238

- 0.2

- 0.3 0.1

- 0.1

- 0.4 1.9 0.9 East North Central 259

- 0.2 0.0 0.0 0.1

- 0.2 1.9 1.6 East South Central 160

- 0.2

- 0.5 0.0

- 0.1

- 1.1 1.9 0.0 West North Central 141

- 0.4 0.0 0.1 0.0

- 0.3 1.9 1.3 West South Central 243

- 0.2

- 0.5 0.0

- 0.1

- 0.7 1.9 0.3 Mountain 103

- 0.2 0.4 0.0 0.1 0.2 1.9 2.3 Pacific 122

- 0.4 0.5 0.0 0.1 1.3 1.9 3.4 By Bed Size: Psychiatric HospitalsCMS

- 1627

- P 164

Beds: 0

- 24 83

- 0.1 0.0 0.1

- 0.3

- 0.7 1.9 0.8 Beds: 25

- 49 77

- 0.1

- 0.4 0.3

- 0.1

- 0.2 1.9 1.4 Beds: 50

- 75 84

- 0.1 0.0 0.0 0.1 0.0 1.9 1.9 Beds: 76 + 251

- 0.1 0.0 0.0 0.0 0.1 1.9 2.0 Psychiatric Units Beds: 0

- 24 662

- 0.4 0.0 0.0 0.0

- 0.3 1.9 1.2 Beds: 25

- 49 301

- 0.4 0.0 0.1 0.0 0.0 1.9 1.7 Beds: 50

- 75 103

- 0.3 0.1 0.0 0.0 0.1 1.9 1.9 Beds: 76 + 56

- 0.4

- 0.1

- 0.2 0.0 0.5 1.9 1.7 1 Includes a FY 201 6 IPF wage index , current CBSA delineations, and a labor

- related share of 0.69294. 2 Includes a 50/50 FY 2016 proposed blended IPF wage index, new CBSA delineations, and a labor

- related share of 0.69294. 3 Includes a 50/50 FY 2016 proposed b lended IPF wage index, new CBSA delineations, a labor

- related share of 0.69294, and a rural adjustment. Providers changing from urban to rural status will receive a 17 percent rural adjustment, and providers changing from rural to urban status will recei ve 2/3 of the 17 percent rural adjustment in FY 2016. For those changing from urban to rural status, the total impact shown is affected by outlier threshold increasing, which results in smaller outlier payments as part of total payments. For those changi ng from rural to urban status, the outlier threshold is being lowered by 2/3 of 17 percent, which results in more providers being eligible for outlier payments, increasing the outlier portion of their total payments. 4 I ncludes a 50/50 FY 2016 proposed blen ded IPF wage index, new CBSA delineations, a labor

- related share of 0.74 9 , and a rural adjustment. 5 This column reflects the payment update impact of the IPF

- specific market basket update of 2. 7 percent, a 0.6 percentage point reduction for the productivity adjustment as required by section 1886(s)(2)(A)(i) of the Act, and a 0.2 percentage point reduction in accordance with sections 1886(s)(2)(A)(ii) and 1886(s)(3)(D) of the Act. 6 Percent changes in estimated payments from FY 2015 to FY 2016 include all of the changes presented in this proposed rule. Note, the products of these impacts may be different from the percentage changes shown here due to rounding effects. 3. Results Table 2 6 above di splays the results of our analysis. The table groups IPFs into the categories listed below based on characteristics provided in the Provider of Services (POS) file, the IPF provider specific file, and cost report data from HCRIS:

 Facility Type

 Location

 Te aching Status Adjustment

 Census Region

 Size The top row of the table shows the overall impact on the 1,617 IPFs included in this analysis.CMS

- 1627

- P 165

In column 3, we present the effects of the update to the outlier fixed dollar loss threshold amount. We estimate that IPF outlier payments as a percentage of total IPF payments are 2.3 percent in FY 2015. Thus, we are adjusting the outlier threshold amou nt in this proposed rule to set total estimated outlier payments equal to 2 percent of total payments in FY 2016. The estimated change in total IPF payments for FY 2016, therefore, includes an approximate 0.3 percent de crease in payments because the outli er portion of total payments is expected to de crease from approximately 2.3 percent to 2.0 percent. The overall impact of this outlier adjustment update (as shown in column 3 of Table
2 6 ), across all hospital groups, is to de crease total estimated payments to IPFs by 0.3 percent. The largest de crease in payments is estimated to reflect a 0.7 percent de crease in payments for IPFs located in teaching hospitals with an intern and resident A verage Daily Census (A DC ) ratio that is 10 percent or greater. In column 4, we present the effects of the budget

- neutral proposed update to the IPF wage index

. This represents the effect of using the most recent wage data available with out taking into account the revised OMB delineations , whi ch are presented separately in the next column

. That is, the impact represented in this column is solely that of updating from the FY
2015 IPF wage index to the FY 2016 IPF wage index without any changes to the OMB delineations . We note that there is no projected change in aggregate payments to IPFs, as indicated in the first row of column 4. However, there will be distributional effects among different categories of IPFs. For example, we estimate the largest increase in payments to be 3.1 percent for I PFs changing from urban to rural status, and the largest decrease in payments to be
0.6 percent for rural non - profit freestanding IPFs.CMS

- 1627

- P 166

In column 5, we present the effects of the new OMB delineations and the proposed transition to the ne w delineations using the transitional IPF wage index . The FY 2016 IPF proposed transitional wage index is a blended wage index using 50 percent of the IPF’s FY 2016 wage index based on the new OMB deli neations and 50 percent of the IPF’s FY 2016 wage index based on the OMB delineations used in FY 2015. In the aggregate, since these proposed updates to the wage index are app lied in a budget

- neutral manner , we do not estimate that these proposed updates would affect overall estimated payments to IP Fs. However, we estimat e that these p roposed updates would have distributional effects

. We estimate the largest increase in payments would be 2.8 percent for IPFs changing from rural to urban status and the largest decrease in payments would be 0.6 percent for rural for

- profit freestanding IPFs. In column 6 , we present the effect s of the changes to the rural adjustment under the new CBSA delineations. There are 3 urban IPFs which would be newly designated as rural IPFs, which would now receive a full 17 percent rural adjustment. We estimate that the largest increase in payments would be to these 3 newly

- rural IPFs . Note that each column’s simulations
include both regular and outlier payments; as regular payments increase, outlier payments decrease to maintain outlier payments at 2 percent of total payments . As such, the increase to total IPF payments is estimated to be 16.2 percent

. There are also 37 rural IPFs which would be newly designated as urban IPFs, where we proposed to phase out their rural adjustment over 3 years. These 37 newly

- urban providers would receive 2/3 of the 17 percent rural adjustment in FY 2016, 1/3 of the 17 percent rural adjustment in FY 2017, and no rural adjustment for FY 2018 and subsequent years. As the regular payments for these 3 7 providers decrease, their outlier payments increase to maintain outlier payments at 2 percent of total payments. WeCMS

- 1627

- P 167

estimate that the largest decrease i n payments would be 4.1 percent for these 37 newly

- urban providers.
In c olumn 7 , we present the estimated effects of the proposed labor

- related share

. T he proposed update to the IPF labor

- related share is made in a budget

- neutral manner and the refore would not affect total estimated IPF PPS payments. However, it would affect the estimated distribution of payments among providers. For example, we estimate the largest increase in payments would be 1.3 percent to IPFs in the Pacific region. W e estimate the largest decrease in payments would be 1.3 percent to rural for

- profit freestanding IPFs and to rural IPF governmental units.
In c olumn 8 , we present the estimated effect s of the update to the IPF PPS payment rates of 1. 9 percent, which are based on a proposed 2. 7 percent IPF

- specific market basket update , less the productivity adjustment of 0.6 percentage point in accordance with section 1886(s)(2)(A)(i), and further reduced by 0.2 percentage point in accordance with section 1886(s)(2)(A)(ii) and
188 6(s)(3)( D ). Finally, c olumn 9 compares our estimates of the total changes reflected in this proposed rule for FY 2016 to the payments for FY 2015 (without these changes). This column reflects all proposed FY 2016 changes relative to FY 2015. The avera ge estimated increase for all IPFs is approximately 1. 6 percent. This estimated net increase includes the effects of the estimated 2. 7 percent market basket update reduced by the productivity adjustment of 0.6 percentage point, as required by section 1886(s)(2)(A)(i)of the Act and further reduced by the “other adjustment” of 0.2 percentage point, as required by sections 1886(s)(2)(A)(ii) and 1886(s)(3)( D ) of the Act. It al so includes the overall estimated 0.3 percent de crease in estimated IPF outlier payments as a percent of total payments from the update to the outlier fixed dollar loss threshold amount. SinceCMS

- 1627

- P 168

we are making the updates noted in columns 4 through 7 in a bu dget

- neutral manner, they will not affect total estimated IPF payments in the aggregate. However, they will affect the estimated distribution of payments among providers. Overall, urban IPFs are estimated to experience a 1. 8 percent increase in payment s in FY 2016 and rural IPFs are estimated to experience a 0. 6 percent increase in payments in FY 2016

. The largest estimated decrease in payments is 0. 5 percent for rural IPFs that transition to urban status as a result of the new OMB delineations. As n oted previously, we proposed to mitigate the effects of the loss of the rural adjustment to these 37 providers by phasing the adjustment out over 3 years. The largest payment increase is estimated at 20. 1 percent for IPFs that transition from urban to rur al status (thereby gaining the 17 percent rural adjustment), followed by a 3. 4 percent increase for IPFs in the Pacific region. 4. Effects of Updates to the IPFQR Program As discussed in section V. of this proposed rule and in accordance with section
18 86(s)(4)(A)(i) of the Act, we will implement a 2 percentage point reduction in the FY 2018 market basket update for IPFs that have failed to comply with the IPFQR Program requirements for FY 2018 , including reporting on the required measure s . In section V. of this proposed rule, we discuss how the 2 percentage point reduction will be applied. For FY 2015, of the 1,725 IPFs eligible for the IPFQR Program, 31 IPFs (1.8 percent) did not receive the full market basket update because of the IPFQ R Program; 10 of these IPFs chose not to participate and 21 did not meet the requirements of the program. W e anticipate that even fewer IPFs would receive the reduction for FY 2016 as IPFs become more familiar with the requirements. Thus, we estimate tha t this policy will have a negligible impact on overall IPF payments for FY 2016.CMS

- 1627

- P 169

Based on the proposals made in this rule, we estimate a total increase in burden of 174.4 hours per IPF or 282,004.80 hours across all IPFs, resulting in a total increase i n financial burden of $ 3,901. 3 3 per IPF or $ 6,308, 447 .38 across all IPFs. As discussed in section VI

. of this proposed rule , we will attribute the costs associated with the proposals to the year in which these costs begin; for the purposes of all the proposals in this proposed rule, that year is FY
2016. Further information on these estimates can be found in section VI. of th is proposed rule. We intend to closely monitor the effects of this quality reporting program on IPF s and help facilitate successful reporting outcomes through ongoing stakeholder education, national trainings, and a technical help desk.
5 . Effect on Beneficiaries Under the IPF PPS, IPFs w ill receive payment based on the average resources consumed by patients for each day. We do not expect changes in the quality of care or access to services for Medicare beneficiaries under the FY 201 6 IPF PPS , but w e continue to expect that paying prospectively for IPF services would enhance the efficiency of the Medicare program. D. Alternatives Considered The statute does not specify an update strategy for the IPF PPS and is broadly written to give the Secretar y discretion in establishing an update methodology. Therefore, we are updating the IPF PPS using the methodology published in the November 2004 IPF PPS final rule , but with a proposed IPF

- specific market basket, and updated labor

- related share, a proposed transitional wage index to implement new OMB CBSA designations, and a proposed phase

- out of the rural adjustment for the 3 7 providers changing from rural to urban status as a result of the updated OMB CBSA delineations used in the FY 2016 IPF PPS transiti onal wage index

. We considered implementing the new OMB designations for the FY 2016 IPF PPS wage index without a blend,CMS

- 1627

- P 17 0

but wanted to mitigate any negative effects of CBSA changes on IPFs. Additionally, we considered abruptly ending the rural adjustment for the 3 7 IPF providers which changed from rural to urban status as a result of the OMB CBSA changes. However, we wanted to propose relief from the effects of OMB’s new CBSA delineations to the 37 p roviders which changed from rural to urban status. We also considered whether to allow a phase

- in of the updated LRS, but decided that the impact of full implementation did not warrant a phase

- in, especially given that we also proposed a transitional wage index and a phase

- out of the rural adjustment for t hose IPFs which changed status from rural to urban under the new CBSAs. Additionally, for the IPFQR Program, alternatives were not considered because the Program, as designed, best achieves quality reporting goals for the inpatient psychiatric care settin g, while minimizing associated reporting burdens on IPFs. S ection V . of this proposed rule discuss es other benefits and objectives of the Program. E. Accounting Statement As required by OMB Circular A

- 4 (available at http://www.whitehouse.gov/omb/circulars_a004_a

- 4 ), in Table 2 7 below, we have prepared an accounting statement showing the classification of the expenditures associated with the provisions of this proposed rule. The costs for data submission presented in Table 2 7 are calculated in section VI, which also discusses the benefits of data collection. This table provides our best estimate of the increase in Medicare payments under the IPF PPS as a result of the changes presented in this proposed rule and based on the data for 1,617 IPFs in our database. Furthermore, we present the estimated costs associated with updating the IPFQR program. The increases in Medicare payments are classified as Federal transfers to IPF Medicare provid ers.CMS

- 1627

- P 171

Table 2 7

—A ccounting Statement: Classification of Estimated Expenditures Change in Estimated Transfers from FY 20 1 5 I P F PPS to FY 201 6 I P F PPS :

Category Transfers Annualized Monetized Transfers $ 80 million From Whom to Whom? Federal Government to I P F Medicare Providers FY 201 6 Cost s to U pdating the Quality Reporting Program for I P Fs :

Category Costs A nnualized Monetized Costs for I P Fs to Submit Data (Quality Reporting Program) $ 6. 31 million

In accordance with the provisions of Executive Order 12866, this proposed rule was reviewed by the Office of Management and Budget.CMS

- 1627

- P 172

List of Subjects in 42 CFR Part 412 Administrative practice and procedure , Health facilities , Medicare , Puerto Rico , Reporting and recordkeeping requirements

. For the reasons set forth in the preamble, the Centers for Medicare and Medicaid Services proposes to amend 42 CFR chapter IV as set forth below:
PART 4 12

–– PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL SER VICES 1. The authority citation for part 412 continues to read as follows:
A UTHORITY : Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106

- 113 (113 Stat. 1501A

- 332), sec. 1206 of Pub. L. 113

- 67, and
sec. 112 of Pub. L. 113

- 93.
2. Section 412.428 is amended by revising paragraph ( e ) to read as follows: §4 12 . 428 Publication of Updates to the inpatient psychiatric facility prospective payment system.

* * * * * ( e ) Describe the ICD

- 10

- CM coding changes and DRG classification changes discussed in the annual update to the hospital inpatient prospective payment system regulations.

* * * * *CMS

- 16 27

- P

Dated : April 13, 2015

.

______________________________ And rew M. Slavitt , Acting Administrator , Centers for Medicare & Medicaid Services

.

Approved : April 22, 2015

.

______________________________ Sylvia M. Burwell , Secretary

.

BILLING CODE 4120
- 01
- PCMS

- 1627

- P 174

NOTE: The following addendum will not publish in the Code of Federal Regulations.

Addendum

— FY 2016 Proposed Rate s and Adjustment Factors Per Diem Rate:
Federal Per Diem Base Rate $ 74 5

. 19 Labor Share (0. 74 9 ) $ 558.15 Non

- Labor Share (0. 25 1 ) $ 187. 04 Per Diem Rate Applying the 2 Percentage Point Reduction
Federal Per Diem Base Rate $ 730.56 Labor Share (0. 7 4 9 ) $ 547.19 Non

- Labor Share (0. 2 5 1 ) $ 183.37 Fixed Dollar Loss Threshold Amount:

$ 9,8 2 5 Wage Index Budget
- Neutrality Factor:

1. 00 41
Facility Adjustments: Rural Adjustment Factor 1.17 Teaching Adjustment Factor 0.5150 Wage Index Pre

- reclass Hospital Wage Index (FY201 5 )CMS

- 1627

- P 175
Cost of Living Adjustments (COLAs):

Area Cost of Living Adjustment Factor Alaska: City of Anchorage and 80

- kilometer (50

- mile) radius by road 1.23 City of Fairbanks and 80

- kilometer (50

- mile) radius by road 1.23 City of Juneau and 80

- kilometer (50

- mile) radius by road 1.23 Rest of Alaska 1.25 Hawaii: City and County of Honolulu 1.25 County of Hawaii 1.1 9 County of Kauai 1.25 County of Maui and County of Kalawao 1.25
Patient Adjustments:
ECT

– Per Treatment $ 320. 82 ECT

– Per Treatment Applying the 2 Percentage Point Reduction $ 31 4. 52
Variable Per Diem Adjustments : Adjustment Factor Day 1

-- Facility Without a Qualifying Emergency Department 1.19 Day 1

-- Facility With a Qualifying Emergency Department 1.31 Day 2 1.12 Day 3 1.08 Day 4 1.05 Day 5 1.04 Day 6 1.02 Day 7 1.01 Day 8 1.01 Day 9 1.00 Day 10 1.00 Day 11 0.99 Day 12 0.99 Day 13 0.99 Day 14 0.99 Day 15 0.98 Day 16 0.97 Day 17 0.97 Day 18 0.96 Day 19 0.95CMS

- 1627

- P 176

Adjustment Factor Day 20 0.95 Day 21 0.95 After Day 21 0.92 Age Adjustments :

Age (in years) Adjustment Factor Under 45 1.00 45 and under 50 1.01 50 and under 55 1.02 55 and under 60 1.04 60 and under 65 1.07 65 and under 70 1.10 70 and under 75 1.13 75 and under 80 1.15 80 and over 1.17

DRG Adjustments :

MS - DRG MS - DRG Descriptions Adjustment Factor 056 057 Degenerative nervous system disorders w MCC

Degenerative nervous system disorders w/o MCC 1.05 080 081 Nontraumatic stupor & coma w MCC

Nontraumatic stupor & coma w/o MCC 1.07 876 O.R

. procedure w principal diagnoses of mental illness 1.22 880 Acute adjustment reaction & psychosocial dysfunction 1.05 881 Depressive neuroses 0.99 882 Neuroses except depressive 1.02 883 Disorders of personality & impulse control 1.02 884 Organic disturbances & mental retardation 1.03 885 Psychoses 1.00 886 Behavioral & developmental disorders 0.99 887 Other mental disorder diagnoses 0.92 894 Alcohol/drug abuse or dependence, left AMA 0.97 895 Alcohol/drug abuse or dependence w rehabilitation therapy 1.02 896 897 Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC

Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC 0.88

Comorbidity Adjustments :
Comorbidity Adjustment Factor Developmental Disabilities 1.04 Coagulation Factor Deficit 1.13 Tracheostomy 1.06 Eating and Conduct Disorders 1.12CMS

- 1627

- P 177

Comorbidity Adjustment Factor Infectious Diseases 1.07 Renal Failure, Acute 1.11 Renal Failure, Chronic 1.11 Oncology Treatment 1.07 Uncontrolled Diabetes Mellitus 1.05 Severe Protein Malnutrition 1.13 Drug/Alcohol Induced Mental Disorders 1.03 Cardiac Conditions 1.11 Gangrene 1.10 Chronic Obstructive Pulmonary Disease 1.12 Artificial Openings

– Digestive & Urinary 1.08 Severe Musculoskeletal & Connective Tissue Diseases 1.09 Poisoning 1.11